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PART A: Prestege is owned 100% by Jep Williams. Jep’s tax basis in his Prestege shares...

PART A: Prestege is owned 100% by Jep Williams. Jep’s tax basis in his Prestege shares is 5,900,000.

Prestege has the following assets and liabilities when it proposes to liquidate.

Asset

FMV

Tax Basis

Cash

200,000

200,000

Equipment

3,300,000

1,800,000

Inventory

800,000

600,000

Land

900,000

700,000

Building

4,700,000

2,300,000

Goodwill

3,000,000

-0-

Totals

12,900,000

5,600,000

REQUIRED:

  1. What is the tax effect of a liquidation to Prestege?
  2. What is the tax effect of a liquidation to Jep?
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