speed dating cincinnati - Tax consequences liquidating corporation

continue reading » Liquidation is generally accomplished by either selling these assets or transferring all of the shares in the corporation.

Possible reasons requiring liquidation are the closing or sale of the business or changing the business structure to provide more favorable tax treatment. 331, a liquidating distribution is considered to be full payment in exchange for the shareholder's stock, rather than a dividend distribution, to the extent of the corporation's earnings and profits E&P.

Every small business is different, and the tax consequences depend on several factors.

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Tax advisers must be aware of the Subchapter C rules, especially those concerned with gain or loss recognition on the distribution.

In addition, Subchapter S contains the rules concerning the pass-through character of income, gain and loss.

Liquidation is generally accomplished by either selling these assets or transferring all of the shares in the corporation.

As part of the conversion, the assets owned by the corporation must first be transferred to the shareholders in exchange for stock.

Consequently, tax professionals advising the corporation and its shareholders must be able to calculate the tax impact for shareholders, who ultimately bear the tax burden of the liquidation.

Crucial to tax-efficient planning in S Corp liquidation situations is accurate calculation of both S shareholders’ “outside” tax basis in their shares, and the S Corp’s “inside” tax basis in its assets.

Thus, changing ownership in an S corporation requires transferring stock in the corporation.

Once you file the appropriate documentation to create a legal corporation in your jurisdiction, state and federal law will recognize the corporation as an independent entity.

Finally, there are some special considerations for unsuccessful corporations.

Because a complete liquidation will cause any shareholder’s suspended losses to be extinguished, the timing of the liquidation becomes a major issue in planning.

Each of these actions produces potentially taxable.… The shareholders generally recognize gain or loss in an amount equal to the difference.…

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