On August 9, 2010, Egret Corporation acquired 100% of the outstanding stock of Aqua Corporation for $1 million and made a qualified section 338 election. On that date, Aqua Corporation had assets with a basis of $700,000 and E&P of $400,000. Assume that the aggregate deemed sale price and the adjusted grossed-up basis each equal $1.2 million and that Aqua Corporation is immediately liquidated. In general, what are the tax consequences to Egret and to Aqua of the section 338 election and the liquidation of Aqua?