Tax consequences of liquidating
I am more than willing to pay extra for your time and patience.The stock basis is going to be what shareholders paid for the stock originally it sounds like. Did that dividend reduce that shareholder's stock basis per IRC 301 above?The corporation has to pay the gains on the 'asset sale' while the shareholders receive liquidating distributions of cash (taxed at capital gains rates if in excess of their basis). What happens if a shareholder contributes ,000 (therefore starting with a basis of ,000), and I buy his shares for ,000. The corporation keeps track of E&P for dividend purposes per above (dividends are income to receipients out of E&P), but otherwise the liquidation is like a sale of the stock. We are down to the wire for tax law extensions, possibly, so we are trying not to miss anything.My basis then becomes ,000, but nothing has changed on the corporate balance sheet. Section 301 (relating to effects on shareholder of distributions of property) shall not apply to any distribution of property (other than a distribution referred to in paragraph (2)(B) of section 316 (b)) in complete liquidation.(1) Within 30 days after the adoption by the corporation of a resolution or plan for the dissolution of the corporation or for the liquidation of the whole or any part of its capital stock, make a return setting forth the terms of such resolution or plan and such other information as the Secretary shall by forms or regulations prescribe; and(2) When required by the Secretary, make a return regarding its distributions in liquidation, stating the name and address of, the number and class of shares owned by, and the amount paid to, each shareholder, or, if the distribution is in property other than money, the fair market value (as of the date the distribution is made) of the property distributed to each shareholder. I read and understood the reporting of corp liquidation. If all money is distributed and the 966 is filed with the IRS by the end of the year 12/31 will the liquidation be complete? The C-corp is a family business, the shares of stock are owned by a brother, sister and brother-in-law.I know you will be gone this weekend but I think we have all the answers to this questions just need to work on the mechanics.The corp books and the sale are clean and simple, it is the family stuff that should have been worked out long before this and I think they understand the issue fairly well.
Is this a gift and everyone agrees, as is to happen (have happened)?
The withdrawal might also be subject to an additional penalty tax—as much as 25% under some circumstances.
The penalty tax kicks in when you take a distribution before reaching a certain age, usually 59½, although there are some exceptions to this rule.
I think I am making this more complicated than needs be?
Except as provided in subparagraph (B), that portion of the distribution which is not a dividend, to the extent that it exceeds the adjusted basis of the stock, shall be treated as gain from the sale or exchange of property.