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

	FMV	Adjusted Tax Basis	Appreciation
Cash	$ 7,000	$ 7,000
Receivables	13,000	13,000
Building	75,000	37,500	37,500
Land	170,000	100,000	70,000
Total	$ 265,000	$ 157,500	$ 107,500
Payables	$ 15,000	$ 15,000
Mortgage*	86,000	86,000
Total	$ 101,000	$ 101,000

* The mortgage is attached to the building and land.

Ernesto was asking for $326,000 for the company. His tax basis in the BLI stock was $90,000. Included in the sales price was an unrecognized customer list valued at $90,000. The unallocated portion of the purchase price ($72,000) will be recorded as goodwill.

Assume Ernesto agrees to sell his stock in BLI to Amy and Brian for $326,000.

a. What amount of gain or loss does BLI recognize if the transaction is structured as a stock sale to Amy and Brian? What amount of corporate-level tax does BLI pay as a result of the transaction.

b. What amount of gain or loss does Ernesto recognize if the transaction is structured as a stock sale to Amy and Brian?

c. What are the tax benefits, if any, to Amy and Brian as a result of structuring the acquisition as a stock sale?