Score: 0 of 4 pts PC:6-40 (similar to) 8 of 10 (6 complete) Michelle owns 100% of Kappa Corporation's common stock. Kappa is an accrual basis, calendar year corporation. Michelle formed the corporation six years ago by transferring $215,000 of cash in exchange for the Kappa stock. Thus, she has held the stock for six years and has a $215,000 adjusted basis in the stock. Kappa's balance sheet at January 1 of the current year is as follows: (Click the icon to view the balance sheet.) Kappa has held the marketable securities for two years. HW Score: 49.49%, 19.8 of 40 pts Question Help In addition, Kappa has claimed $20,000 of MACRS depreciation on the machinery and $150,000 of straight-line depreciation on the building. On January 2 of the current year, Kappa liquidates and distributes all property to Michelle except that Kappa retains cash to pay the accounts payable and any tax liability resulting from Kappa's liquidation. Assume that Kappa has no other taxable income or loss. Requirement Determine the tax consequences to Kappa and Michelle. Assume a 21% corporate tax rate. Let's begin by determining the tax consequences for Kappa. Select the property needed to compute Kappa's total gain or loss, compute the gain or loss for each asset and determine the character for each gain or loss. Then, compute Kappa's total gain or loss and compute Kappa's tax liability. Gain or loss recognized Amount Character Data Table Assets Basis FMV Cash $ 440,000 $ 440,000 Marketable securities 80,000 105,000 Inventory Equipment 350,000 400,000 220,000 245,000 580,000 876,000 Building Total $ 1,670,000 $ 2,066,000 Liabilities and Equity Accounts payable 165,000 215,000 1,290,000 165,000 1,901,000 $ 2,066,000 Common stock Retained earnings (and E&P) $ 1,670,000 Total