Temporal corporation is considering the acquisiton of champion corporation's stock in exchange for cash. Two options are under review: (1) Temporal purchases the assets from Champion for 1.3 million or (2) Temporal purchases the Champion stock .5 million and makes a Sec. 338 election shortly after the stock purchase. Champion has no NOL or capital loss carryovers. Champions balance sheet is presented below. Assets Adjusted Basis FMV Liabilities & Equity Amount

Cash 140,000 140,000 Short Term Debt 200,000

Marketable Securities 120,000 160,000 Long Term Debt 600,000

Accounts Receivable 100,000 100,000 Paid In Capital 400,000

Inventory (FIFO) 90,000 100,000 Retained Earnings 100,000

Plant and Equipment 70,000 220,000 Total 1,300,00

Intangiables - 580,000

Total 520,000 1,300,000

requirment a. What advantage would accrue to Temporal if it purchases the assets directly? What disadvantage would accrue to Champion if it sells the assets and then liquidates?

Requirment b. What advantage would accrue to Temporal if it purchases the Champion stock for cash and subsequently makes a SEC. 338 election? What advantage would accrue to Champion if it's shareholders sell the Champion stock?

Requirment C. How would your answers change if Champion had encurred 150,000 of NOLs in the current year that it cannot carry back in full due to insufficient taxable income in the preceding two years?

The NOL incurred by Champion in the current year the cost of making the SEC.338 election. Assuming a tax rate of 34% the NOL will the tax cost by?