On April 23, 2022, Auk Corporation acquires 100% of the outstanding stock of Amazon Corporation (E & P of $750,000) for $1,200,000. Amazon Corporation has assets with a fair market value of $1,400,000 (basis of $800,000), no liabilities, and no loss or tax credit carryovers. Auk Corporation files a timely § 338 election. Assume that both the aggregate deemed sale price (ADSP) and adjusted grossed-up basis (AGUB) are $1,306,329.

a. What are the tax consequences of the § 338 election to Amazon Corporation and to Auk Corporation?

b. Assume that Amazon Corporation is liquidated immediately following the § 338 election. What are the tax consequences of the liquidation to Amazon Corporation and to Auk Corporation?