Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

of 3 Required information [The following information applies to the questions displayed below) Amy and Brian were investigating the acquisition of a tax accounting business,

image text in transcribed
image text in transcribed
image text in transcribed
of 3 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: pped Appreciation Cash Receivables Building Land Total FMV $ 25,500 23,200 133,000 272,250 $ 453,950 Adjusted Tax Basis $ 25,500 23,200 66,500 90,750 $ 205,950 66,500 181,500 $ 248,000 Payables $ 23,000 $ 23,000 Mortgage 15 , 150,000 Total $ 173,000 $ 173,000 * The mortgage is attached to the building and land. Ernesto was asking for $568,950 for the company. His tax basis in the BLI stock was $148,000. Included in the sales price was an unrecognized customer list valued at $196,000. The unallocated portion of the purchase price ($92,000) will be recorded as goodwill. (Negative amounts should be indicated by a minus sign.) ! 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: Adjusted Tax FMV Basis Appreciation Cash $ 25,500 $ 25,500 Receivables 23,200 23,200 Building 133,000 66,589 66,500 Land 272,250 90, 750 181,500 Total $ 453,950 $ 205,950 $ 248, Payables $ 23,000 $ 23,000 Mortgage 150,000 150,000 Total $ 173,000 $ 173,000 *The mortgage is attached to the building and land Ernesto was asking for $568,950 for the company. His tax basis in the BLI stock was $148,000. Included in the sales price was an unrecognized customer list valued at $196,000. The unallocated portion of the purchase price ($92,000) will be recorded as goodwill. (Negative amounts should be indicated by a minus sign.) b. What amount of gain or loss does Ernesto recogpize if the transaction is structured as a direct asset sale to Amy and Bran, and BLI distributes the aftertax proceeds (computed in part (a)] to Ernesto in liquidation of his stock? (Round intermediate calculations and final answer to the nearest whole dollar amount.) Answer is complete but not entirely correct. Gain or loss recognized 90,000 Appreciation Cash Receivables Building Land FMV $ 25,500 23,200 133,000 272,250 $ 453,950 Adjusted Tax Basis $ 25,500 23,200 66,500 90,750 $ 205,95 66,500 181,500 $ 248,000 Total Payables Mortgage Total $ 23,000 150,000 $ 173,000 $ 23,000 150,000 $ 173,00 The mortgage is attached to the building and land Ernesto was asking for $568,950 for the company. His tax basis in the BLI stock was $148,000. Included in the sales price was an unrecognized customer list valued at $196,000. The unallocated portion of the purchase price ($92,000) will be recorded as goodwill. (Negative amounts should be indicated by a minus sign.) 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? Answer is not complete. Complete this question by entering your answers in the tabs below. Reg ci Req c2 What is the tax basis in the assets received by Amy and Brian? Cash Accounts receivable Building Land Customer list Goodwill Total 0

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Intermediate Accounting

Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Nicola M. Young, Irene M. Wiecek, Bruce J. McConomy

11th Canadian edition Volume 2

1119048540, 978-1119048541

Students also viewed these Accounting questions

Question

Date the application was sent

Answered: 1 week ago