Problem 19-47 (LO 19-4) [The following information applies to the questions displayed below.) 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 company's tax accounting balance sheet. The relevant information is summarized as follows: Appreciation Cash Receivables Building Land Total FMV $ 28,750 17,600 145,500 252,000 $443,850 Adjusted Basis $ 28,750 17,600 72, 750 84,000 $203, 100 72,750 168,000 $ 240,750 Payables Mortgage* Total $ 21,600 126,750 $148,350 $ 21,600 126,750 $148,350 * The mortgage is attached to the building and land. Ernesto was asking for $546,000 for the company. His tax basis in the BLI stock was $163,000. Included in the sale price was an unrecognized customer list valued at $148,000. The unallocated portion of the purchase price ($102,500) will be recorded as goodwill. (Negative amounts should be indicated by a minus sign.) Problem 19-47 Part a 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 Adjusted Basis Gain or Loss Recognized Tax Rate Tax % Problem 19-47 Part b 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.) Gain or loss recognized Problem 19-47 Part c 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? Complete this question by entering your answers in the tabs below. Req ci Req c2 What are the tax benefits, if any, to Amy and Brian as a result of structuring the acquisition as a direct asset purchase? O No tax benefits. Tax basis in the assets received equal to the assets' fair market value. ( Req c1 Req c2 > Problem 19-47 Part c 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? Complete this question by entering your answers in the tabs below. Req 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 Problem 19-47 (LO 19-4) [The following information applies to the questions displayed below.) 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 company's tax accounting balance sheet. The relevant information is summarized as follows: Appreciation Cash Receivables Building Land Total FMV $ 28,750 17,600 145,500 252,000 $443,850 Adjusted Basis $ 28,750 17,600 72, 750 84,000 $203, 100 72,750 168,000 $ 240,750 Payables Mortgage* Total $ 21,600 126,750 $148,350 $ 21,600 126,750 $148,350 * The mortgage is attached to the building and land. Ernesto was asking for $546,000 for the company. His tax basis in the BLI stock was $163,000. Included in the sale price was an unrecognized customer list valued at $148,000. The unallocated portion of the purchase price ($102,500) will be recorded as goodwill. (Negative amounts should be indicated by a minus sign.) Problem 19-47 Part a 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 Adjusted Basis Gain or Loss Recognized Tax Rate Tax % Problem 19-47 Part b 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.) Gain or loss recognized Problem 19-47 Part c 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? Complete this question by entering your answers in the tabs below. Req ci Req c2 What are the tax benefits, if any, to Amy and Brian as a result of structuring the acquisition as a direct asset purchase? O No tax benefits. Tax basis in the assets received equal to the assets' fair market value. ( Req c1 Req c2 > Problem 19-47 Part c 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? Complete this question by entering your answers in the tabs below. Req 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
