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:

	FMV	Adjusted Tax Basis	Appreciation
Cash	$ 32,250	$ 32,250
Receivables	18,600	18,600
Building	136,000	68,000	68,000
Land	269,250	89,750	179,500
Total	$ 456,100	$ 208,600	$ 247,500
Payables	$ 27,200	$ 27,200
Mortgage*	135,750	135,750
Total	$ 162,950	$ 162,950

* The mortgage is attached to the building and land.

Ernesto was asking for $544,150 for the company. His tax basis in the BLI stock was $151,000. Included in the sales price was an unrecognized customer list valued at $172,000. The unallocated portion of the purchase price ($79,000) will be recorded as goodwill

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?

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Problem 08-57 (LO 08-4 (Algo)

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[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:

	FMV	Adjusted Tax Basis	Appreciation
Cash	$ 32,250	$ 32,250
Receivables	18,600	18,600
Building	136,000	68,000	68,000
Land	269,250	89,750	179,500
Total	$ 456,100	$ 208,600	$ 247,500
Payables	$ 27,200	$ 27,200
Mortgage*	135,750	135,750
Total	$ 162,950	$ 162,950

* The mortgage is attached to the building and land.

Ernesto was asking for $544,150 for the company. His tax basis in the BLI stock was $151,000. Included in the sales price was an unrecognized customer list valued at $172,000. The unallocated portion of the purchase price ($79,000) will be recorded as goodwill. (Negative amounts should be indicated by a minus sign.)

Problem 08-57 Part a (Algo)

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
Liabilities assumed
Amount realized	$0
Adjusted Basis
Gain or Loss Recognized	$0
Tax Rate		%
Tax	$0

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? (Round intermediate calculations and final answer to the nearest whole dollar amount.)

1. c1. What are the tax benefits, if any, to Amy and Brian as a result of structuring the acquisition as a direct asset purchase?
2. c2. What is the tax basis in the assets received by Amy and Brian?