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:

Note: Leave no answer blank. Enter zero if applicable. Negative amounts should be indicated by a minus sign.

${?}^{**}$ 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.

Rather than purchase BLI directly, Amy and Brian will have their corporation, Spartan Tax Services $($STS$),$ acquire the

business from Ernesto in a tax$-$deferred Type A merger. Amy and Brian would like Ernesto to continue to run BLI, which he

agreed to do if he could obtain an equity interest in STS$.$ As part of the agreement, Amy and Brian propose to pay Ernesto

$$200,000$ plus voting stock in STS worth $$200,000.$ Ernesto will become a $10$ percent shareholder in STS after the

transaction.

Problem $08-59$ Part c $($Static$)$

c$.$ What amount of gain or loss does Ernesto recognize if the transaction is structured as a Type A merger?