.Target Corporation (T) is a C corporation. Ts 1,000 shares of common stock (its only class) are owned by three unrelated individual shareholders as follows: Shareholder No. Shs. Adj. Basis F.M.V. A 500 $ 50,000 $ 500,000 B 400 40,000 400,000 C 100 140,000 100,000 Total 1,000 $230,000 $1,000,000 A and B are in their late 70s and have held their T stock since the company was founded many years ago. C recently inherited her stock. T has $400,000 of accumulated earnings and profits and the following assets (all held long-term) and liabilities: Assets Adj. Basis F.M.V. Cash $200,000 $ 200,000 Inventory 50,000 100,000 Equipment ($100,000 1245 recapture) 100,000 200,000 Building (no recapture) 50,000 300,000 Securities 400,000 300,000 Goodwill 0 200,000 Total $800,000 $1,300,000 Liabilities Bank loan 300,000 Total $ 300,000 383 T and its shareholders are considering a sale of the business. Purchaser Corporation (P) is interested in acquiring T. If specific computations are required by your instructor, assume (for computational convenience) that C corporations are taxed on all their income at a flat corporate rate of 20 percent and individuals are taxed at a flat 40 percent rate on ordinary income and a 20 percent rate on long-term capital gains (and ignore the 3.8 percent tax on net investment income). What are the tax consequences of the following alternative acquisition methods to T, Ts shareholders, and P?

a. T adopts a plan of complete liquidation, sells all of its assets (except the cash but subject to the bank loan) to P for $800,000 cash, and distributes the after-tax proceeds to its shareholders in proportion to their stock holdings.

e. P purchases all the stock of T for $900 per share and makes a Section Code 338 election. (Why didn't P pay $1,000 per share for the T stock?)

f. P purchases all the stock of T for cash but does not make the Section Code 338 election. (Consider generally what P should pay for the T stock.)