Liquidating an s corp Pinayweb chat


02-Aug-2017 21:12

The liquidating distribution is not reported on the 1120-S.  This should be reported on Form 1099-DIV in the liquidating distribution box.' data-inline-edit-type='wysiwyg' data-inline-edit-url='/answers/4340231' id='inline_edit_answer_4340231_body' You need to prepare a final 1120-S return along with the appropriate number of K-1's.

S corp distributed its remaining asset, cash of 5,000 to sole shareholder and then dissolved on 12/30/2014. Once you receive your K-1 from the S corporation, you then use this to prepare your 1040.  The final step is to determine your gain or loss on the S corporation investment.  You compare your liquidating distribution received to your basis in the S corp stock.  This will then get reported on Sch D and appropriate Form 8949.

At issue is whether the company’s status as a corporation had been terminated by the administrative dissolution. Something else to consider is that under Section 336(a) of the tax code, a gain or loss is recognized by a liquidating corporation on the distribution of its property in complete liquidation, as if such property were sold to the distributee at its fair market value. 142 ) states that “…where a corporation ceases business operations, has retained no assets, has no income, and has actually liquidated, there is in effect a de facto dissolution, even though the corporation has not been formally dissolved…” In addition, it is entirely possible for the corporation to continue in existence even though it has been, as a matter of state law, dissolved.

If it is considered terminated, the company would have been viewed as having completely liquidated, and both it and its shareholders would have experienced the tax consequences attendant to the situation. In other words, in most cases, the liquidation of a corporation commonly engenders two levels of taxation: tax will be imposed at both the corporate and distributee shareholder levels.* The De Facto Company Closure A complete liquidation is not always accompanied by a formal or legal company shutdown. Thus, unless dissolution brings about an automatic transfer of the corporation’s assets to its shareholders, the corporation, even though dissolved, continues its existence.

Generally, property you inherit from a decedent receives a “step-up” (increase) in basis equal to the fair market value of the property at the time of death.

The step-up is potentially valuable as it allows the beneficiary to avoid paying capital gains tax on any appreciation in the value of the asset prior to the decedent’s death upon the future sale of the inherited property.

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A step-up in basis applies to real and personal property, both tangible (e.g., artwork) and intangible (e.g. However, it is not available for property that is not owned in the decedent’s name, such as property owned by a business. 1,000 trade show booth, 168,000 goodwill, 1,000 for noncompete. You need to prepare a final 1120-S return along with the appropriate number of K-1's.  The S corp will need to determine the gain or loss on the sale of assets based on the Form 8594.  You will need to include this form with the 1120-S completed as the "seller" (as the buyer attaches one to their return as well). Turbo Tax wants to report LTCG on K-1 but then how do I enter shareholder's basis against this gain upon dissolution of corp.Witness the situation described in recent letter from the Internal Revenue Service (LTR 200806006, November 7, 2007), which addresses a seeming anomaly related to the tax code.

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The anomaly is corporate dissolution without liquidation.

The amount of the tax basis determines the tax treatment of such items as flow-through losses and corporate distributions.



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