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Assume Ernesto agrees to sell his stock in BI to Amy and Brian for $400,000. a. What amount of gain or loss does BLI recognize if the transaction is structured as a stock sale to Amy and Brian? What amount of corporate-level tax does BU pay as a result of the transaction. Gain or loss recognized Corporate-level tax

Assume Ernesto agrees to sell his stock in BI to Amy and Brian for $400,000. a. What amount of gain or loss does BLI recognize if the transaction is structured as a stock sale to Amy and Brian? What amount of corporate-level tax does BU pay as a result of the transaction. Gain or loss recognized Corporate-level tax

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Adjusted Tax Basis FHV Appreciation Cash Receivables Building Land $ 10,000 15,000 100,000 225,000 $ 10,000 15,000 50,000 75,000 $ 150,000 50,000 150,000 $ 200,000 $ 350,000 Total Payables Mortgage $ 18,000 112,000 $ 130,000 $ 18,000 112,000 $ 130,000 Total * The mortgage is attached to the building and land. Ernesto was asking for $400,000 for the company. His tax basis in the BLI stock was $100,000. Included in the sales price was an unrecognized customer list valued at $100,000. The unallocated portion of the purchase price ($80,000) will be recorded as goodwill. Assume Ernesto agrees to sell his stock in BLI to Amy and Brian for $400,000. a. What amount of gain or loss does BLI recognize if the transaction is structured as a stock sale to Amy and Brian? What amount of corporate-level tax does BLI pay as a result of the transaction. Gain or loss recognized Corporate-level tax
Transcribed Image Text:Adjusted Tax Basis FHV Appreciation Cash Receivables Building Land $ 10,000 15,000 100,000 225,000 $ 10,000 15,000 50,000 75,000 $ 150,000 50,000 150,000 $ 200,000 $ 350,000 Total Payables Mortgage $ 18,000 112,000 $ 130,000 $ 18,000 112,000 $ 130,000 Total * The mortgage is attached to the building and land. Ernesto was asking for $400,000 for the company. His tax basis in the BLI stock was $100,000. Included in the sales price was an unrecognized customer list valued at $100,000. The unallocated portion of the purchase price ($80,000) will be recorded as goodwill. Assume Ernesto agrees to sell his stock in BLI to Amy and Brian for $400,000. a. What amount of gain or loss does BLI recognize if the transaction is structured as a stock sale to Amy and Brian? What amount of corporate-level tax does BLI pay as a result of the transaction. Gain or loss recognized Corporate-level tax
L TOIUWy HHOauU appes IU Une yuesuus ursprayeu veuw. 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.) THV $ 10,000 15,000 100,000 225,000 $350,000 Adjusted Tax Basin $ 10,000 15,000 50,000 75,000 Apprecjation Cash Receivables Building Land 50,000 150,000 $150,000 $ 200,000 Total Payables Mortgage $ 18,000 112,000 $ 130,000 $ 10,000 112,000 $ 130,000 Total * The mortgage is attached to the building and land. Ernesto was asking for $400,000 for the company. His tax basis in the BLI stock was $100,000. Included in the sales price was an unrecognized customer list valued at $100,000. The unallocated portion of the purchase price ($80,000) will be recorded as goodwill. Assume Ernesto agrees to sell his stock in BLI to Amy and Brian for $400,000. b. What amount of gain or loss does Ernesto recognize if the transaction is structured as a stock sale to Amy and Brian? Gain or loss recognized
Transcribed Image Text:L TOIUWy HHOauU appes IU Une yuesuus ursprayeu veuw. 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.) THV $ 10,000 15,000 100,000 225,000 $350,000 Adjusted Tax Basin $ 10,000 15,000 50,000 75,000 Apprecjation Cash Receivables Building Land 50,000 150,000 $150,000 $ 200,000 Total Payables Mortgage $ 18,000 112,000 $ 130,000 $ 10,000 112,000 $ 130,000 Total * The mortgage is attached to the building and land. Ernesto was asking for $400,000 for the company. His tax basis in the BLI stock was $100,000. Included in the sales price was an unrecognized customer list valued at $100,000. The unallocated portion of the purchase price ($80,000) will be recorded as goodwill. Assume Ernesto agrees to sell his stock in BLI to Amy and Brian for $400,000. b. What amount of gain or loss does Ernesto recognize if the transaction is structured as a stock sale to Amy and Brian? Gain or loss recognized
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