Rex and Felix are the sole shareholders of the Dogs and Cats Corporation (DCC). After several years of operations, they chose to liquidate the corporation and operate the business as a partnership. Rex and Felix hired a lawyer to draw up the legal papers to dissolve the corporation, but they need some tax advice from you, their trusted accountant. If necessary, assume DCC is subject to a 15 percent marginal tax rate.
The DCC's tax accounting balance sheet at the date of liquidation is as follows:

a. Compute the gain or loss recognized by DCC, Rex, and Felixon a complete liquidation of the corporation assuming each shareholder receives a pro rata distribution of the corporation's assets and assumes a pro rata amount of the liabilities.
b. Compute the gain or loss recognized by DCC, Rex, and Felixon a complete liquidation of the corporation assuming Felix receives all cash and Rex receives the remainder of the assets and assumes all of the liabilities.
c. Will Felix recognize any income when he collects the accounts receivable?
d. Will Felix be able to take a deduction when he pays the accounts payable?
e. Compute the gain or loss recognized by DCC, Rex, and Felixon a complete liquidation of the corporation assuming each shareholder receives a pro rata distribution of the corporation's assets and assumes a pro rata amount of the liabilities.
f. Compute the gain or loss recognized by DCC, Rex, and Felixon a complete liquidation of the corporation assuming Felix receives all cash and Rex receives the remainder of the assets and assumes all of the liabilities.
g. Would the tax result change if the property was contributed one year ago? Two years ago? Three years ago?

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Cash Accounts receivable Inventory Equipment Building Tax Basis S30,000 10,000 10,000 30,000 15,000 5.000 FMV $30,000 10,000 20,000 20,000 30,000 40,000 $150.000 an Total assets $100.000 Accounts payable Mortgage payable - Building Mortgage payable - Land Total liabilities $5,000 10,000 10.000 Common stock-Rex (80%) Common stock-Felix (20%) Total shareholders' equity S60,000 S100,000 20,000 5.000