CASE 28 Corporate Liquidation Planning Russell has earned a fortune manufacturing educational toys for children. After 10 years of designing and producing toys, he sold his patents and got out of the business. At the present time, the only non-cash assets left in his wholly-owned corporation are some equipment (basis, $100,000; fair market value, $100,000) and a piece of appreciated land which had been purchased for $50,000 and is now worth $550,000. The balance sheet of the corporation as of this date is: Assets: Liabilities: Cash $105,000 Notes Payable: Equipment 100,000 To Russell $125,000 Land 50,000 To others 15,000 $140,000 Owner's Equity: Common Stock $ 88,000 Retained Earnings 27,000 115,000 0255,000 0255,000 Russell's attorneys have convinced him to liquidate his corporation and suggested he seek our assistance concerning the liquidation. The corporation has been dormant since December 31, 20x1, so it will have no revenues or expenses for the current taxable year ending December 31 , 20x2. Russell and his wife, Jane, have a joint taxable income of approximately $100,000 from their other 20x2 activities. Their previous year's joint taxable incomes were $500,000, but they expect subsequent years' incomes to be similar to that of this year. Russell plans to liquidate the Illinois-based corporation near the end of this year. He will use some of the cash to pay off the note due to others and keep the rest of the assets for personal use with no foreseeable likelihood of subsequent disposition