ABC Corporation acquires 20% of XYZ Corporation on August 10, 20x1. ABC Corporation acquires another 30% on November 15, 20x1. ABC acquires the remaining 50% on April 10, 20x2. ABC Corporation paid a total of $1,900,000 for the XYZ Corporation stock. XYZ Corporation has net assets of $1,100,000 (Asset Basis = $1,600,000; Liabilities Basis = $500,000). The fair market value of the assets is $2,500,000. There is a tax rate of 34%.

a. What is the acquisition date for the XYZ Corporation stock for Section 338 purposes? When must the Section 338 election be made (at the latest)?

b. Assuming that ABC Corporation makes the Section 338 election, what is the “deemed sale” price?

c. What is the total basis of the assets following the “deemed sale”?

d. How do the liabilities affect the “deemed sale”?