Paul, a long-time client of yours, has operated an automobile repair shop (as a C corpora- tion) for most of his life. The shop has been fairly successful in recent years. His children are not interested in continuing the business. Paul is age 62 and has accumulated approximately $500,000 in assets outside of his business, most of which are in his personal residence and retirement plan. A recent balance sheet for the business shows the following amounts: Adjusted Assets Basis FMV Liabilities & Equity Amount Cash $ 25,000 $ 25,000 Accounts payable $ 30,000 Inventory 60,000 75,000 Mortgage payable 70,000 Equipment 200,000 350,000 Paid-in capital 120,000 Building 100,000 160,000 Retain earnings 205,000 Land 40,000 60,000 Goodwill -0- 100,000 Total $425,000 $770,000 Total $425,000 The inventory is accounted for using the first-in, first-out inventory method. The corpora- tion has claimed depreciation of $250,000 on the equipment. The corporation acquired the building 11 years ago and has claimed $25,000 of depreciation under the MACRS rules. The goodwill is an estimate that Paul feels reflects the value of his business over and above the other tangible assets. Paul has received an offer of $775,000 from a competing automobile repair company for the noncash assets of his business, which will be used to establish a second location for the competing company. The corporation will sell the assets within 60 days and distribute remaining cash to Paul in liquidation of the corporation. The purchaser has obtained the necessary bank financing to make the acquisition. Paul's basis in his stock is $300,000. Required: Prepare a memorandum for Paul outlining the tax consequences of the sale transaction and liquidation of the corporation