Amy and Brian were investigating the acquisition of a tax accounting business, Bottom Line Inc. (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:

	FMV			Adjusted Basis			Appreciation
Cash	$	10,000		$	10,000
Receivables		15,000			15,000
Building		100,000			50,000			50,000
Land		225,000			75,000			150,000
Total	$	350,000		$	150,000		$	200,000
Payables	$	18,000		$	18,000
Mortgage*		112,000			112,000
Total	$	130,000		$	130,000

* The mortgage is attached to the building and land. Ernesto was asking for $400,000 for the company. His tax basis in the BLI stock was $100,000. Included in the sales price was an unrecognized customer list valued at $100,000. The unallocated portion of the purchase price ($80,000) will be recorded as goodwill. (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 as a result of the transaction?

Cash paid $400,000

Liabilities assumed 130,000

Amount realized 530,000

Adjusted Basis ??

Gain or Loss Recognized ??

Tax Rate 21%

Tax ??

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?