59. Kevin and Bob have owned and operated SOA as a C corporation for a number of years. When they formed the entity, Kevin and Bob each contributed $100,000 to SOA. They each have a current basis of $100,000 in their SOA ownership interest. Information on SOA’s assets at the end of year 5 is as follows (SOA does not have any liabilities):
Assets FMV Adjusted Basis Builtin Gain Cash $200,000 $200,000 $
0 Inventory 80,000 40,000 40,000 Land and building 220,000 170,000 50,000 Total $500,000 At the end of year 5, SOA liquidated and distributed half of the land, half of the inventory, and half of the cash remaining after paying taxes (if any) to each owner. Assume that, excluding the effects of the liquidating distribution, SOA’s taxable income for year 5 is $0.

a. What is the amount and character of gain or loss SOA will recognize on the liquidating distribution?

b. What is the amount and character of gain or loss Kevin will recognize when he receives the liquidating distribution of cash and property? Recall that his stock basis is $100,000 and he is treated as having sold his stock for the liquidation proceeds.