FMV Required information [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: (Leave no answer blank. Enter zero if applicable. Negative amounts should be indicated by a minus sign.) Adjusted Tax Basis Appreciation Cash 17,000 $ 17,000 Receivables 20,000 20,000 Building 97,000 48,500 48,500 Land 214,000 40,000 174,000 Total $ 348,000 $ 125,500 $ 222,500 Payables $ 23,000 $ 23,000 Mortgages 112,000 112 000 Total $ 135,000 $ 135,000 * The mortgage is attached to the building and land. Ernesto was asking for $404,000 for the company. His tax basis in the BLI stock was $140,000. Included in the sales price was an unrecognized customer list valued at $140,000. The unallocated portion of the purchase price ($51,000) 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 Emesto $202,000 plus voting stock in STS worth $202,000, Ernesto will become a 10 percent shareholder in STS after the transaction c. What amount of gain or loss does Ernesto recognize if the transaction is structured as a Type A merger? Gain or loss recognized d. What is Ernesto's tax basis in the STS stock he receives in the exchange? Tax basis FMV Required information [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: (Leave no answer blank. Enter zero if applicable. Negative amounts should be indicated by a minus sign.) Adjusted Tax Basis Appreciation Cash 17,000 $ 17,000 Receivables 20,000 20,000 Building 97,000 48,500 48,500 Land 214,000 40,000 174,000 Total $ 348,000 $ 125,500 $ 222,500 Payables $ 23,000 $ 23,000 Mortgages 112,000 112 000 Total $ 135,000 $ 135,000 * The mortgage is attached to the building and land. Ernesto was asking for $404,000 for the company. His tax basis in the BLI stock was $140,000. Included in the sales price was an unrecognized customer list valued at $140,000. The unallocated portion of the purchase price ($51,000) 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 Emesto $202,000 plus voting stock in STS worth $202,000, Ernesto will become a 10 percent shareholder in STS after the transaction c. What amount of gain or loss does Ernesto recognize if the transaction is structured as a Type A merger? Gain or loss recognized d. What is Ernesto's tax basis in the STS stock he receives in the exchange? Tax basis