Forms for liquidating an s corporation
If the shareholder assumes known corporate liabilities or receives corporate property subject to a liability (such as the distribution of mortgaged land), the amount realized is reduced by the amount of the liability (, 311 F.2d 951 (Ct. It appears that the adjusted basis of stock held in a liquidating corporation is adjusted for current-year passthrough items prior to determination of gain or loss from the receipt of the liquidating distributions (see Regs. If the shareholder has different bases in different blocks of stock, the computation of gain or loss depends on whether there is a single distribution or a series of liquidating distributions (Rev. The shareholder recognizes Example 1: T holds 30 shares of stock in an S corporation, represented by two blocks of stock.T has a basis of ,000 in Block 1 (which represents 10 shares) and a basis of ,000 in Block 2 (which represents 20 shares).The corporation distributes ,000 cash to T in return for his stock.
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).In certain cases, this treatment is preferable to sale or exchange treatment.If the shareholder prefers § 1368 treatment, the sale or exchange rules can be easily avoided, for example, by failing to adopt a plan of liquidation or delaying the distribution until 2 years after the tax year the plan is adopted.In addition, during the liquidation of an S corporation, it may be difficult to predict the ending balance of AAA.This may, in turn, make it difficult to accurately determine the AAA available for ordinary distributions and make inadvertent dividend distributions from AE&P more likely to occur.
For tax years beginning in 2008, 20, the savings is even greater for taxpayers in the 10% and 15% brackets because their net capital gain is taxed at 0% in those tax years..