Rex and Felix are the sole shareholders of the Dogs and Cats Corporation (DCC). After several years of operations, they chose 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. If necessary, assume DCC is subject to a 15 percent marginal tax rate.

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

	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%)	$	60,000		$	100,000
Common stockFelix (20%)		20,000			25,000
Total shareholders' equity	$	80,000		$	125,000

(Any answer representing a loss should be entered as a negative number. Leave no answer blank. Enter zero if applicable.)

a. Compute the gain or loss recognized by DCC, Rex, and Felix 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.