Sec. 338 Basis Allocation. Alpha Corporation purchases all of Theta Corporation’s stock for $300,000 cash. Alpha makes a timely Sec. 338 election. Theta’s balance sheet at the close of business on the acquisition date is as follows:

^aThe equipment cost $200,000.
^bThe building is MACRS property on which Theta has claimed $10,000 of depreciation.

a. What is the aggregate deemed sale price for the Theta assets (assume a 21% corporate tax rate)?

b. What amount and character of gain or loss must Theta recognize on the deemed sale?

c. What is the adjusted grossed-up basis for the Theta stock? What basis is allocated to each of the individual assets?

d. What happens to “old” Theta’s tax attributes? Do they carry over to “new” Theta?

e. What amount (if any) of goodwill can Theta amortize following the acquisition? Over what period and under what method may Theta amortize the goodwill?

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Assets Adjusted Basis FMV Liabilities and Equity Атount $ 50,000 18,000 66,000 21,000 95,000 6,000 24,000 Accounts payable Note payable Owner's equity $ 50,000 38,000 65,000 43,000 144,000 12,000 48,000 Cash Marketable securities $ 40,000 60,000 300,000 Accounts receivable Inventory (FIFO) Equipment Land Building Total $280,000 $400,000 Total $400,000