Forms for liquidating an s corporation


23-Nov-2019 12:01

Distributions received by the shareholder are treated as payment in full for the exchange of stock.

The shareholder’s adjusted basis in the stock is subtracted from the cash and fair market value (FMV) of other property received from the corporation. The general rule is that a shareholder’s stock basis is determined as of the end of the S corporation’s tax year.

Thus, accumulated earnings and profits (“AE&P”) or accumulated adjustments accounts (“AAA”) are not relevant to the characterization of the liquidating distribution.

Since the existence of AE&P has no impact on the characterization of a liquidating distribution, an S corporation with AE&P should identify liquidating distributions as such (for example, in a board resolution adopting the plan of complete liquidation).

If the S corporation has a large AE&P amount but a nominal AAA balance, a § 1368 distribution will result in dividend income, while sale or exchange treatment allows a partial stock basis offset and capital gain treatment.

Conversely, if the corporation has little or not AE&P or the distribution is less than the AAA balance, a § 1368 distribution allows full stock basis offset at the shareholder level, while sale or exchange treatment allows only part of the shareholder’s stock basis to offset the distribution.

forms for liquidating an s corporation-9

dating site for truckers only

forms for liquidating an s corporation-75

Wecamchat free room

The 2008 distribution is allocated ,000 to Block 1 (10 ÷ 30 x 5,000) and ,000 to Block 2 (20 ÷ 30 x 5,000).

If the S corporation has AE&P, the shareholders may want to forgo distributions prior to commencement of the liquidating distributions, because once the AAA is exhausted, preliquidation distributions are treated as dividend income to the extent of AE&P.

The shareholder’s basis in assets received is their FMV at the time of the distribution. A distribution in partial liquidation of an S corporation will also qualify for sale or exchange treatment under § 302 if the distribution is pursuant to a plan and occurs within the tax year the plan is adopted or the following tax year and the “safe harbor” of § 302(e)(2) is met.

For example, if an S corporation with an April 30 year-end makes its final liquidating distribution on October 31, 2007, the shareholders will report 18 months of passthrough items on their 2007 returns.

forms for liquidating an s corporation-14

best dating site yahoo

This bunching problem can be avoided if the corporation delays making its final distribution from October 31, 2007, to a date in 2008 (after the end of the shareholders’ calendar tax year).T recognizes a ,000 gain on Block 1 (,000 – [[

This bunching problem can be avoided if the corporation delays making its final distribution from October 31, 2007, to a date in 2008 (after the end of the shareholders’ calendar tax year).

T recognizes a $45,000 gain on Block 1 ($45,000 – $0 basis) and an $80,000 gain on Block 2 ($90,000 – $10,000 basis).

||

This bunching problem can be avoided if the corporation delays making its final distribution from October 31, 2007, to a date in 2008 (after the end of the shareholders’ calendar tax year).T recognizes a $45,000 gain on Block 1 ($45,000 – $0 basis) and an $80,000 gain on Block 2 ($90,000 – $10,000 basis).

]] basis) and an ,000 gain on Block 2 (,000 – ,000 basis).