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. DCCs tax accounting balance sheet at the date of liquidation is as follows:

	Adjusted tax basis	FMV
Assets
Cash	$ 30,000	$ 30,000
Accounts receivable	10,000	10,000
Inventory	10,000	20,000
Equipment	30,000	20,000
Building	15,000	30,000
Land	5,000	40,000
Total assets	$ 100,000	$ 150,000
Liabilities
Accounts payable		$ 5,000
Mortgage payableBuilding		10,000
Mortgage payableLand		10,000
Total liabilities		$ 25,000
Shareholders Equity
Common stockRex (80%)		$ 100,000
Common stockFelix (20%)		25,000
Total shareholders equity		$ 125,000

Required:

1. 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 corporations assets and assumes a pro rata amount of the liabilities.