F Corporation purchases from an unrelated person 100 percent of the stock of G Corporation on April 20 of the current year. Assume the purchase price, adjusted for all relevant items, is $200,000. Gs assets a acquisition date are

Class	Basis	Fair Market Value
I Cash	$ 20,000	$ 20,000
III Accounts receivable	40,000	40,000
IV Inventory	50,000	110,000
Total	$110,000	$170,000

Under provisions of 338, the purchase price is first allocated to cash in the amount of $20,000. This leaves $180,000 to be allocated. As there are no Class II assets, the allocation is to Class III and IV. How should the remainder be allocated?

	a. Allocate $180,000 to the receivables and inventory; income from the sale of the inventory would b reduced. This will allow a loss to be taken when the receivables are collected.
	b. Allocate $150,000 to the receivables and inventory. Because the remaining purchase price exceeds the fair market value of the Class III and IV assets, the basis of the assets in this class is limited to their fair market value.
	c. Allocate $90,000 to the receivables and inventory. The basis of the parent corporation is that of the subsidiary corporation, according to the carryover principle under 338.
	d. None of the above