Dorothy Operates a Pet Store as a Sole Proprietorship Dorothy Acquired the Building in 1997 for $100,000 of Which

question 9

Essay

Dorothy operates a pet store as a sole proprietorship.During the year she sells the business to Florian for $200,000.The assets sold and the allocation of the purchase price are as follows:
$$\begin{array} { l r r } & \underline{ \text { Adjusted Basis} } & \underline{ \text { Purchase Price }} \\ \text { Inventory } & \$ 20,000 & \$ 20,000 \\\text { Building } & 60,000 & 105,000 \\\text { Land } & 20,000 & 35,000 \\\text { Equipment } & - 0 - & 30,000 \\\text { Goodwill } & \underline{ - 0 - } & \underline{ 100,000 } \\\text { Total Assets } &\underline{ \$ 100,000} & \underline{ \$ 200,000}\end{array}$$
Dorothy acquired the building in 1997 for $100,000 of which $20,000 was allocated to the land.She paid $40,000 for the equipment in the same year.What are the tax consequences of the liquidation for Dorothy?

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Definitions:

Accrued Revenues

Revenues earned by a company for goods or services provided but not yet billed or received by the end of the accounting period.