Luis Owns All the Stock of Silver, Inc $\begin{array}{lcc}\text { Assets } & \text { Basis } & \text { FMV } \\\text { Cash } & \$ 15,000 & \$ 15,000\end{array}$

question 108

Essay

Luis owns all the stock of Silver, Inc., a C corporation for which his adjusted basis is $225,000. Luis founded Silver
12 years ago. The assets and liabilities of Silver are recorded as follows. $\begin{array}{lcc}\text { Assets } & \text { Basis } & \text { FMV } \\\text { Cash } & \$ 15,000 & \$ 15,000\end{array}$ *Accumulated depreciation of $55,000 has been deducted.
Luis has agreed to sell the business to Marilyn and they have agreed on a purchase price of $350,000 less any outstanding liabilities. They are both in the 35% tax bracket.
a. Advise Luis on whether the form of the sales transaction should be a stock sale or an asset sale.
b. Advise Marilyn on whether the form of the purchase transaction should be a stock purchases or an asset purchase.

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Definitions:

Balance Sheet

A financial report indicating the assets, liabilities, and shareholders' equity of a company at a certain moment, which serves as a foundation for calculating returns and assessing its financial health.

Present Value

The current worth of a future sum of money or stream of cash flows, given a specified rate of return.

Annuity

A financial product that pays out a fixed stream of payments to an individual, typically used as part of a retirement strategy.

Consecutive Payments

Regular payments made in a sequence, without interruption, over a specified period.