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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:

		FMV			Adjusted Basis		Appreciation
Cash	$	32,250		$	32,250
Receivables		18,600			18,600
Building		136,000			68,000			68,000
Land		269,250			89,750			179,500
Total	$	456,100		$	208,600			$ 247,500
Payables	$	27,200		$	27,200
Mortgage*		135,750			135,750
Total	$	162,950		$	162,950

* The mortgage is attached to the building and land.

Ernesto was asking for $544,150 for the company. His tax basis in the BLI stock was $151,000. Included in the sales price was an unrecognized customer list valued at $172,000. The unallocated portion of the purchase price ($79,000) will be recorded as goodwill. (Any answer representing a loss should be entered as a negative number.)

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, assuming a tax rate of 34 percent?
	Cash paid Liabilities assumed Amount realized Adjusted Basis Gain or Loss Recognized Tax Rate 34 % Tax

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 question a) to Ernesto in liquidation of his stock?
	Gain or loss recognized

c-1.	What is the nature of tax benefits to Amy and Brian as a result of structuring the acquisition as a direct asset purchase?
	Tax basis in the assets received equal to the assets' fair market value. No tax benefits.

c-2.	What is the tax basis in the assets received by Amy and Brian?
	Cash Accounts receivable Building Land Customer list Goodwill Total

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