Question
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
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 fromMonterrey, 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 |
What would be the primary benefit to Zena from the IRC Section 338election:
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