Comprehensive Problem 19-68 (LO 19-1, LO 19-2, LO 19-3, LO 19-4, LO 19-5) (Algo) Rex and Felix are the sole shareholders of Dogs and Cats Corporation (DCC) After several years of operations using the accrual method, they decided 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. They are hoping you will find a way for them to liquidate the corporation while minimizing their total income tax liability, Rex has a tax basis in his shares of $128,000 and Felix has a tax basis in his shares of $64,000 DCC's tax accounting balance sheet at the date of liquidation is as follows Adjusted tax hasis FHV $ 64,000 44,000 44,000 81,000 49,888 39,000 $ 321,000 $ 64,000 44,000 71,000 54,800 98,000 168,000 $439,800 Assets Cash Accounts receivable Inventory Equipment Building Land Total assets Liabilities Accounts payable Mortgage payable-Building Mortgage payable-Land Total liabilities Shareholders' Equity Common stock-Rex (80%) Common stock-Felix (203) Total shareholders equity $ 39,80e 44,000 44,000 $ 127,000 $ 134,180 59,000 $ 193,000 Complete this question by entering your answers in the tabs below. Reg A to B ReqC to D Req E to F a. Compute the gain or loss recognized by Rex, Felix, and DCC on 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 abilities. b. Compute the gain or loss recognized by DCC, Rex, and Felix on a complete liquidation of the corporation assuming that Felix received cash in lieu of his pro rata share of assets and liabilities, (For both requirements, negative amounts should be indicated by a minus sign. Leave no answer blank. Enter zero if applicable.) Show less Part A Part B Gain or loss recognized by Rex Gain or recognized by Felix Gain or loss recognized by DCC Reno ReqC to D > Complete this question by entering your answers in the tabs below. ences Reg A to B Req cto D Req E to F 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? C Accounts receivable d. Accounts payable Reg A to B Reg C to D Reg Eto ences e. Compute the gain or loss recognized by Rex, Felix, and DCC on 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 Rex, Felix, and DCC on a complete liquidation of the corporation assuming Felix receives $59,000 in cash and Ros receives the remainder of the assets and assumes all of the liabilities (For both requirements, negative amounts should be indicated by a minus sign. Leave no answer blank. Enter zero if applicable.) Show less Part E Part F Gain or loss recognized by Rex Gain or loss recognized by Felix Gain or loss recognized by DCC
