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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's tax accounting balance sheet at the date of liquidation is as follows: Adjusted Basis FMV $ 34,000 $ 34,000 14,000 14,000 14,000 28,000 36,000 24,000 17,000 34,000 7,000 56,000 122,000 $190,000 $ Assets Cash Accounts receivable Inventory Equipment Building Land Total assets Liabilities Accounts payable Mortgage payable-Building Mortgage payable-Land Total liabilities Shareholders' Equity Common stock-Rex (80%) Common stock-Felix (20%) Total shareholders equity $ 25,000 20,000 20,000 $ 65,000 $100,000 25,000 $125,000 Required: 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 DCC, Rex, and Felix on a complete liquidation of the corporation assuming that Felix received cash in lieu of his pro rata share of assets and liabilities

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