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Tax adjusted basis

Kate and Jack were investigating the acquisition of a bush whacking business, Park, Inc. As part of their discussions with the sole shareholder of Park, Inc, Antonia, they examined the company’s tax accounting balance sheet. The relevant information is summarized as follows:

FMV. Tax adjusted basis

Cash 10.000. 10.000

Receivable 15.000. 15.000

Building 100.000. 50.000

Land 225.000. 75.000

Total 350.000. 150.000

Mortgage*. 112.000

*The mortgage is attached to the building and land; assuming the mortgage is a condition of the sale.

Antonia will receive $400, 000 to complete the sale of her Park, Inc. stock. Her tax basis in the Park, Inc. stock is $250,000. Any unallocated portion of the purchase price will be recorded as goodwill. (6)

What amount of gain Park, Inc recognize on the sale of its assets?

What amount of gain will Antonia recognize in this situation?


Last Updated on February 18, 2019

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