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

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.

(b)T adopts a plan of complete liquidation, distributes all of its assets (subject to the liability) to its shareholders in proportion to their stock holdings, and the shareholders then sell the assets (less any cash but subject to the bank loan) to P for $800,000.