Courtney is interested in purchasing The Matrix Company.Matrix's assets are:
$$\begin{array} { l r r }
& \text { Adjusted Basis } & \text { Fair Market Value } \
\text { Cash } & \$ 2,300 & \$ 2,300 \
\text { Inventory } & 16,500 & 19,200 \
\text { Equipment } & 13,000 & 9,000 \
\text { Land } & 25,000 & 40,500 \
\text { Building } & 66,600 & \$ 129,000 \
\text { Totals } & \$ 123,400 & \$ 200,000
\end{array}$$
I.If Courtney buys the stock of The Matrix for $225,000,the total basis in the assets will be $200,000.
II.If Courtney pays Matrix $240,000 for the Matrix assets,Courtney's total basis in all of the assets of the business will be $123,400.

Question

Courtney is interested in purchasing The Matrix Company.Matrix's assets are:
$$\begin{array} { l r r } 
& \text { Adjusted Basis } & \text { Fair Market Value } \
\text { Cash } & \$ 2,300 & \$ 2,300 \
\text { Inventory } & 16,500 & 19,200 \
\text { Equipment } & 13,000 & 9,000 \
\text { Land } & 25,000 & 40,500 \
\text { Building } & 66,600 & \$ 129,000 \
\text { Totals } & \$ 123,400 & \$ 200,000
\end{array}$$
I.If Courtney buys the stock of The Matrix for $225,000,the total basis in the assets will be $200,000.
II.If Courtney pays Matrix $240,000 for the Matrix assets,Courtney's total basis in all of the assets of the business will be $123,400.

Quizplus · Accepted Answer

Statement I is incorrect because if Courtney buys the stock, the basis in the assets remains at their fair market value, which is $200,000, not the purchase price of $225,000. Statement II is incorrect because if Courtney buys the assets for $240,000, her basis in the assets would be the purchase price of $240,000, not the adjusted basis of $123,400.

Courtney Is Interested in Purchasing the Matrix Company IIf Courtney Buys the Stock of the Matrix for $225,000,the