Michelle owns 100% of Alpha Corporation's common stock. Alpha is an accrual basis, calendar year corporation. Michelle formed the corporation six years ago by transferring $125,000 of cash in exchange for the Alpha stock. Thus, she has held the stock for six years and has a $125,000 adjusted basis in the stock. Alpha's balance sheet at January 1 of the current year is as follows: Alpha has held the marketable securities for two years. In addition, Alpha has claimed $20,000 of MACRS depreciation on the machinery and $120,000 of straight-line depreciation on the building. On January 2 of the current year, Alpha liquidates and distributes all property to Michelle except that Alpha retains cash to pay the accounts payable and any tax liability resulting from Alpha's liquidation. Assume that Alpha has no other taxable income or loss.

Balance Sheet