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 $ 17,250 $ 17,250

Receivables 21,200 21,200

Building 110,000 55,000 55,000

Land 248,250 82,750 165,500

Total $ 396,700 $ 176,200 $ 220,500

Payables $ 18,100 $ 18,100

Mortgage* 153,000 153,000

Total $ 171,100 $ 171,100

* The mortgage is attached to the building and land.

Ernesto was asking for $425,600 for the company. His tax basis in the BLI stock was $170,000. Included in the sales price was an unrecognized customer list valued at $109,000. The unallocated portion of the purchase price ($91,000) will be recorded as goodwill. Note: Negative amounts should be indicated by a minus sign.

Required:

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? Assume a tax rate of 21%

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.

c1. What are the tax benefits, if any, to Amy and Brian as a result of structuring the acquisition as a direct asset purchase?

c2. What is the tax basis in the assets received by Amy and Brian?