Mary Gold owns all of the outstanding stock of RL$4,$ Inc. which owns and operates two motels under the name "Rooms$-4-$Less". Mary is a widow and has four unmarried adult children. Each motel is a $100$ unit building that rents to vacationers on a heavily traveled interstate highway. RL$4$ has no other source of income other than the gross rents from the motels. Mary formed RL$4$ twelve years ago by contributing $$1,000,000$ in cash for all of the RL$4$ stock.

Five years ago, in order to reduce her potential estate tax, she gifted $40\%$ of her RL$4$ stock to her four children. Since that time, RL$4$ has suffered operating losses as a result of intense competition from other motel chains. Mary and the four children have recently sold their stock to another motel operator for a total price of $$600,000.$

Required: Analyze the transaction above and discuss the Federal income tax consequences of the sale of the RL$4$ stock by Mary and the children. Discuss specifically the amount and classification $($capital or ordinary$)$ of any loss recognized by them on the sale. There is no need to discuss any gift or estate tax matters.