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):

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.

Assets FMV Adjusted BasisBuilt-in Gain Cash Inventory Land and building Total $200,000$200,000 40,000 170,000 80,000 220,000 $500,000 SO 40,000 50,000