31. LO.6 Emily and Frida are negotiating with George to purchase the business he operates as Pelican, Inc. The assets of Pelican, Inc., a C corporation, are recorded as follows.

Asset Basis FMV Cash $ 20,000 $ 20,000 Accounts receivable 50,000 50,000 Inventory 100,000 110,000 Furniture and fixtures 150,000 170,000*

Building 200,000 250,000**

Land 40,000 150,000 George’s basis for the Pelican stock is $560,000. George is subject to a 32% marginal tax rate.

a. Emily and Frida purchase the stock of Pelican from George for $908,000. Determine the tax consequences to Emily, Frida, Pelican, and George.

b. Emily and Frida purchase the assets from Pelican for $908,000. Determine the tax consequences to Emily, Frida, Pelican, and George.

c. The purchase price is $550,000 because the fair market value of the building is $150,000 and the fair market value of the land is $50,000. No amount is assigned to goodwill. Emily and Frida purchase the stock of Pelican from George. Determine the tax consequences to Emily, Frida, Pelican, and George.