(i) The facts are the same as in Example 3 of § 1.336-3(g) , that is, Seller owns all 100 of the outstanding shares of the common stock of Target, the only class of Target stock outstanding. On January 1 of Year 1, Seller sells 10 shares of Target stock to A for $6,000 ($600 per share). On August 1 of Year 1, Seller distributes the remaining 90 shares of Target stock to its unrelated shareholders in a transaction described in section 355(d)(2) or (e)(2). The value of Target stock on August 1 is $560 per share. Target has two assets, Asset 1, which is stock in trade of Target, a Class IV asset, with a basis of $15,000 and a value of $50,000, and Asset 2, which is stock in a publicly traded, unrelated corporation, a Class II asset, with a basis of $38,000 and a value of $16,000. Target has no liabilities other than any liabilities for Federal tax on account of the deemed asset disposition. Assume Target's Federal tax rate for any gain or income on the deemed asset disposition is 34 percent. Seller had no selling costs in connection with its sale of the 10 shares of Target stock. A section 336(e) election is made. In addition, A incurred $100 of acquisition costs with respect to the purchase of the 10 shares of Target stock. Target's AGUB in the assets deemed acquired pursuant to § 1.336-2(b)(2)(ii)(B) is determined as follows (for purposes of this Example 3, GRD is the grossed-up basis of recently disposed stock, BND is the basis in nonrecently disposed stock, TotL is Target's total liabilities, including Target's tax liability, and X is the A's total acquisition costs): AGUB = GRD + BND + TotL
GRD = ($6,000 + ($560 * 90)) * ((100 - 0)/100) + X
GRD = ($6,000 + $50,400) * (100/100) + $100
GRD = $56,500
BND = $0
TotL = .34 * ($27,152 (Target's gain recognized on deemed disposition of Asset 1) - $22,000 (Target's loss recognized on deemed disposition of Asset 2)) (see Example 3 of § 1.336-3(g) for determination of Target's gain and loss recognized on deemed disposition of Assets 1 and 2)
TotL = $1,752
AGUB = $56,500 + $0 + $1,752
AGUB = $58,252