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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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