a. Holt Corporation acquires all the stock of Star Corporation and makes a timely Sec. 338 election.

Question:

a. Holt acquires all the stock of Star and makes a timely Sec. 338 election. The adjusted grossed-up basis of the Star stock is $2.5 million. The FMV of tangible assets on Star’s is $1.8 million. How are the new bases in Star’s individual assets determined?
b. How would your answer change if instead the adjusted grossed-up basis were $1.4 million?
Balance Sheet
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