Cassie purchases a sole proprietorship for $145,000.The fair market value of the tangible assets is $110,000 and the agreed to value of goodwill is $10,000.Assuming there are no other intangible assets, Cassie's basis for the tangible assets is $132,917 ($110,000 + $22,917) and her basis for the goodwill is $12,083 ($10,000 + $2,083).

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Cassie's basis for the tangible assets should be $110,000, and her basis for the goodwill should be $10,000. The total purchase price of $145,000 should be allocated based on the fair market values, not increased arbitrarily.

Cassie Purchases a Sole Proprietorship for $145,000