Lu Is Interested in Purchasing the Assets of Idaho Potato

question 27

Multiple Choice

Lu is interested in purchasing the assets of Idaho Potato Chip Company.Idaho's assets are:
$\begin{array}{lcc}& \underline {\text { Adjusted Basis }}& \underline {\text { Fair Market Value } }\\\text { Cash } & \$ 2,300 & \$ 2,300 \\\text { Inventory } & \$ 16,500 & \$ 19,200 \\\text { Equipment } & \$ 13,000 & \$ 9,000 \\\text { Land } & \$ 10,000 & \$ 40,500 \\\text { Building } &\underline { \$ 76,600} & \underline {\$ 129,000 }\\&\underline { \$ 118,400} & \underline {\$ 200,000} \\\end{array}$
All of the following statements are correct except:

• A)If Lu pays $225,000 for the assets, Lu's basis in the tangible assets will be $200,000.
• B)If Lu buys the stock of Idaho for $225,000, the basis in the assets wll be $118,400.
• C)If Lu pays $225,000 for the assets, Lu will have a basis in the building of $129,000.
• D)If Lu buys the stock of Idaho for $225,000, he will recognize goodwill, of $25,000.

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