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 companys 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.

Amy and Brian agreed to pay $390,000 for the company. Ernesto has a 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 ($90,000) will be recorded as goodwill. The corporate-level tax of 21 percent applies to BLI as a result of the transaction.

What amount of gain or loss does Ernesto recognize if the transaction is structured as a direct asset sale by BLI to Amy and Brian and BLI distributes the after-tax proceeds to Ernesto in liquidation of his stock?

Amy and Brian agree to pay $390,000 to purchase all of the BLI stock from Ernesto. What amount of gain or loss does Ernesto recognize if the transaction is structured as a stock sale to Amy and Brian?