Question

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: Adjusted Appreciation Cash Receivables Building Land Total $ 28,750 17,600 145,500 252,000 $443,850 $ 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.)

Answer 1

solution cash pald (A) 546000 Leabilities assumed (6) 148350 Amount realized (A+B)=c 694350 Adjusted basis D 203100 Gain 491250 recognized G=C-D Tax rate. 34% Tax 167025