Pace Corp. owns 100% of the stock of Strom Corp. Pace’s basis for the Strom Corp. stock is $225,000. Pursuant to a plan of complete liquidation, Strom distributes to Pace assets with a fair market value of $800,000 and an adjusted basis of $300,000, along with liabilities of $100,000. At the time of liquidation, Strom has accumulated earnings and profits of $600,000.

a. How much gain is recognized by Strom Corp. on the liquidating distribution to Pace Corp.?

b. How much gain is recognized by Pace as a result of the liquidation?

c. What tax basis does Pace Corp. have for the assets it receives from Strom Corp.?

d. What happens to Pace's $225,000 basis for its Strom stock?

e. What happens to Strom’s $600,000 of accumulated earnings and profits?