Now assume Delrey, Inc. is a wholly owned subsidiary of Monterrey, Inc. Purchase price has been negotiated to the same as in #1 (Property with an adjusted $500,000 and FMV of $3,000,000 and Cash of $20,000,000. Zena and Delrey consent to a IRC Section 338(h)(10) election. Monterrey's basis in Delrey is $13,000,000.

On July 1, 2019 Zena, Inc. Purchased the stock ofDelrey, Inc. directly

from Monterrey, Inc. . Zena consummated the purchase using cash of $20,000,000 and property with an adjusted basis of $500,000 and a Fair Market value of $3,000,000. At the time of the acquisition,Delreyhad the following assets:

Assets	Adjusted basis	FMV
AR	400,000	300,000
Marketable securities	300,000	800,000
Loan receivable	200,000	100,000
US GOV Securities	500,000	500,000
Inventory	1,000,000	2,000,000
Furniture/fixtures	0	1,100,000
Building	600,000	4,000,000
Covenant not to compete	0	1,200,000
Total	3,000,000	10,000,000

The corporate level tax as a result of the Section 338(h)(10) election will be the responsibility of: Monterrey or Delrey or Zena