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 PMV $ 28,500 20,400 127,000 233,250 $ 409,150 Adjusted Tax Basis $ 28,500 20,400 63,500 77,750 $ 190,150 $ 24,200 $ 24,200 174,800 174,800 $ 199,000 $ 199,000 Appreciation 63,500 155,500 $ 219,000 The mortgage is attached to the building and land. Emesto was asking for $496,950 for the company. His tax basis in the BLI stock was $146.000. Included in the sales price was an unrecognized customer list valued at $189,000. The unallocated portion of the purchase price ($97,800) will be recorded as goodwill. Note: Negative amounts should be indicated by a minus sign. Problem 19-57 Part b (Algo) b. What amount of gain or loss does Ernesto recognize if the transaction is structured as a direct asset sale to Amy and Brian, and BLI distributes the after-tax proceeds [computed in part (a)) to Ernesto in liquidation of his stock? Note: Round intermediate calculations and final answer to the nearest whole dollar amount. Gain or loss recognized
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 PMV $ 28,500 20,400 127,000 233,250 $ 409,150 Adjusted Tax Basis $ 28,500 20,400 63,500 77,750 $ 190,150 $ 24,200 $ 24,200 174,800 174,800 $ 199,000 $ 199,000 Appreciation 63,500 155,500 $ 219,000 The mortgage is attached to the building and land. Emesto was asking for $496,950 for the company. His tax basis in the BLI stock was $146.000. Included in the sales price was an unrecognized customer list valued at $189,000. The unallocated portion of the purchase price ($97,800) will be recorded as goodwill. Note: Negative amounts should be indicated by a minus sign. Problem 19-57 Part b (Algo) b. What amount of gain or loss does Ernesto recognize if the transaction is structured as a direct asset sale to Amy and Brian, and BLI distributes the after-tax proceeds [computed in part (a)) to Ernesto in liquidation of his stock? Note: Round intermediate calculations and final answer to the nearest whole dollar amount. Gain or loss recognized
Chapter28: Income Taxati On Of Trusts And Estates
Section: Chapter Questions
Problem 8DQ
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Transcribed Image Text: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
$ 28,500
20,400
127,000
233,250
$ 409,150
Gain or loss recognized
$ 24,200
174,800
Adjusted Tax
Basis
$ 26,500
20,400
63,500
77,750
$190,150
$ 24,200
174,800
$ 199,000 $ 199,000
Appreciation
63,500
155,500
$ 219,000
*The mortgage is attached to the building and land.
Ernesto was asking for $496,950 for the company. His tax basis in the BLI stock was $146.000. Included in the sales price
was an unrecognized customer list valued at $189,000. The unallocated portion of the purchase price ($97,800) will be
recorded as goodwill.
Note: Negative amounts should be indicated by a minus sign.
Problem 19-57 Part b (Algo)
b. What amount of gain or loss does Ernesto recognize if the transaction is structured as a direct asset sale to Amy and Brian, and BLI
distributes the after-tax proceeds (computed in part (a)) to Ernesto in liquidation of his stock?
Note: Round intermediate calculations and final answer to the nearest whole dollar amount.
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