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

Both statements are incorrect. Statement I suggests that the purchase price of the stock is lower than the basis in the assets, which is not possible. Statement II suggests that the purchase price of the assets is higher than the resulting basis, which is also not possible. The purchase price of the stock or assets would generally determine the basis in the assets.

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

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