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 $$60,000$ and Felix has a tax basis in his shares of $$30,000.$ DCC$\text{'}$s tax accounting balance sheet at the date of liquidation is as follows:

Adjusted tax basis FMV

Assets

Cash $$30,000$ $$30,000$

Accounts receivable $10,00010,000$

Inventory $10,00020,000$

Equipment $30,00020,000$

Building $15,00030,000$

Land $5,00040,000$

Total assets $$100,000$ $$150,000$

Liabilities

Accounts payable $$5,000$

Mortgage payable$$Building $10,000$

Mortgage payable$$Land $10,000$

Total liabilities $$25,000$

Shareholders' Equity

Common stock$$Rex $(80\%)$ $$100,000$

Common stock$$Felix $(20\%)25,000$

Total shareholders equity $$125,000$

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 liabilities.

b$.$ Compute the gain or loss recognized by Rex, Felix, and DCC on a complete liquidation of the corporation assuming that Felix received cash in lieu of his pro rata share of assets and liabilities.

Note: For both requirements, negative amounts should be indicated by a minus sign. Leave no answers blank. Enter zero if applicable.