Required information [The following information applies to the questions displayed below.] Amy and Brian were investigating the acquisition of a tax accounting business, Bottom Line Incorporated (BLI). As part of their discussions with the sole shareholder of the corporation, Ernesto Young, they examined the company's tax accounting balance sheet. The relevant information is summarized as follows: Cash Receivables Building Land Total Payables Mortgage* Total FMV $ 28,800 17,600 Adjusted Tax Basis $ 28,800 Appreciation 17,600 145,600 252,000 72,800 84,000 $ 444,000 $ 203,200 72,800 168,000 $ 240,800 $ 21,600 126,800 $ 21,600 126,800 $ 148,400 $ 148,400 * The mortgage is attached to the building and land. Ernesto was asking for $546,100 for the company. His tax basis in the BLI stock was $163,000. Included in the sales price was an unrecognized customer list valued at $148,000. The unallocated portion of the purchase price ($102,500) will be recorded as goodwill. Note: Negative amounts should be indicated by a minus sign. a. What amount of gain or loss does BLI recognize if the transaction is structured as a direct asset sale to Amy and Brian? What amount of corporate-level tax does BLI pay because of the transaction?
Required information [The following information applies to the questions displayed below.] Amy and Brian were investigating the acquisition of a tax accounting business, Bottom Line Incorporated (BLI). As part of their discussions with the sole shareholder of the corporation, Ernesto Young, they examined the company's tax accounting balance sheet. The relevant information is summarized as follows: Cash Receivables Building Land Total Payables Mortgage* Total FMV $ 28,800 17,600 Adjusted Tax Basis $ 28,800 Appreciation 17,600 145,600 252,000 72,800 84,000 $ 444,000 $ 203,200 72,800 168,000 $ 240,800 $ 21,600 126,800 $ 21,600 126,800 $ 148,400 $ 148,400 * The mortgage is attached to the building and land. Ernesto was asking for $546,100 for the company. His tax basis in the BLI stock was $163,000. Included in the sales price was an unrecognized customer list valued at $148,000. The unallocated portion of the purchase price ($102,500) will be recorded as goodwill. Note: Negative amounts should be indicated by a minus sign. a. What amount of gain or loss does BLI recognize if the transaction is structured as a direct asset sale to Amy and Brian? What amount of corporate-level tax does BLI pay because of the transaction?
Chapter13: Choice Of Business Entity—general Tax And Nontax Factors/formation
Section: Chapter Questions
Problem 55P
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Question
![Required information
[The following information applies to the questions displayed below.]
Amy and Brian were investigating the acquisition of a tax accounting business, Bottom Line Incorporated (BLI). As part of
their discussions with the sole shareholder of the corporation, Ernesto Young, they examined the company's tax
accounting balance sheet. The relevant information is summarized as follows:
Cash
Receivables
Building
Land
Total
Payables
Mortgage*
Total
FMV
$ 28,800
17,600
Adjusted Tax
Basis
$ 28,800
Appreciation
17,600
145,600
252,000
72,800
84,000
$ 444,000
$ 203,200
72,800
168,000
$ 240,800
$ 21,600
126,800
$ 21,600
126,800
$ 148,400
$ 148,400
* The mortgage is attached to the building and land.
Ernesto was asking for $546,100 for the company. His tax basis in the BLI stock was $163,000. Included in the sales price
was an unrecognized customer list valued at $148,000. The unallocated portion of the purchase price ($102,500) will be
recorded as goodwill.
Note: Negative amounts should be indicated by a minus sign.
a. What amount of gain or loss does BLI recognize if the transaction is structured as a direct asset sale to Amy and Brian? What amount
of corporate-level tax does BLI pay because of the transaction?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd7281d6f-ac1b-42af-a55f-bbecd60bf330%2F876754ee-a2e7-42a0-a248-921db6f5bc48%2Fq1d3sr2_processed.png&w=3840&q=75)
Transcribed Image Text:Required information
[The following information applies to the questions displayed below.]
Amy and Brian were investigating the acquisition of a tax accounting business, Bottom Line Incorporated (BLI). As part of
their discussions with the sole shareholder of the corporation, Ernesto Young, they examined the company's tax
accounting balance sheet. The relevant information is summarized as follows:
Cash
Receivables
Building
Land
Total
Payables
Mortgage*
Total
FMV
$ 28,800
17,600
Adjusted Tax
Basis
$ 28,800
Appreciation
17,600
145,600
252,000
72,800
84,000
$ 444,000
$ 203,200
72,800
168,000
$ 240,800
$ 21,600
126,800
$ 21,600
126,800
$ 148,400
$ 148,400
* The mortgage is attached to the building and land.
Ernesto was asking for $546,100 for the company. His tax basis in the BLI stock was $163,000. Included in the sales price
was an unrecognized customer list valued at $148,000. The unallocated portion of the purchase price ($102,500) will be
recorded as goodwill.
Note: Negative amounts should be indicated by a minus sign.
a. What amount of gain or loss does BLI recognize if the transaction is structured as a direct asset sale to Amy and Brian? What amount
of corporate-level tax does BLI pay because of the transaction?
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