Simon is purchasing Tina\'s business for $9,000. The FMV of the assets are as fo

Question

Simon is purchasing Tina's business for $9,000. The FMV of the assets are as follows:

Accounts Receivable                           $1,000

Equipment                                             2,500

Furniture                                                   500

Building                                                 5,000

Land                                                     1,000

                                                         $10,000

What is Simon's basis in the Accounts Receivable?

Explanation / Answer

Ans: Purchase value of business = $ 9,000  

Total FMV of the assets = $ 10,000

Simon's basis of acquiring the business = $9,000 / $ 10,000

= 90 %

Simon's basis in Accounting Receivable = FMV of account receivable * 90 %

= $ 1,000 * 90%

= $ 900

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