Using the same facts in problem 47, 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, assuming a tax rate of 34 percent?

b. What amount of gain or loss does Ernesto recognize if the transaction is structured as a stock sale to Amy and Brian?

c. What are the tax benefits, if any, to Amy and Brian as a result of structuring the acquisition as a stock sale?

Data From Problem 47:

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:

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.