Pace Corp. owns 100% of the stock of Strom

Corp. Paces basis for the Strom Corp. stock

is $225,000. Pursuant to a plan of complete

liquidation, Strom distributes to Pace

assets with a fair market value of $800,000

and an adjusted basis of $300,000, along

with liabilities of $100,000. At the time of

liquidation, Strom has accumulated earnings

and profits of $600,000.

a.

How much gain is recognized by Strom

Corp. on the liquidating distribution to

Pace Corp.?

b.

How much gain is recognized by Pace as

a result of the liquidation?

c.

What tax basis does Pace Corp. have for

the assets it receives from Strom Corp.?

d.

What happens to Pace's $225,000 basis

for its Strom stock?

e.

What happens to Stroms $600,000 of

accumulated earnings and profits?