What are the tax consequences for liquidating a corproation
For businesses structured as a C-corporation (C-corp), the tax implications associated with a sale are steep, so it is worth considering what they are and how to avoid this potential liability.Asset versus Stock Sale As a C-corp, an asset sale is subject to double taxation—first on corporate taxable income due to the gain on sale of assets, which is at ordinary corporate rates and again on shareholder dividends or liquidating distributions, which can cause a tax rate of almost 50 percent.A buyer will almost always favor an asset sale, because they are able to step-up the tax basis in the assets to the purchase price, which then reduces the future taxes, due to being depreciated at the new stepped-up value.In many cases, this helps the buyer with the cash flow to make the acquisition.When it comes to preparing your business for sale, there are several aspects of your company you begin to evaluate to ensure you’re minimizing tax liabilities and maximizing the transaction proceeds.A common area often overlooked by many business owners is assessing whether your current corporate structure is the right fit for a business sale.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.
The cost of real property shall not include any amount in respect of real property taxes which are treated under section 164 (d) as imposed on the taxpayer.If I understand correctly - a liquidating dividend is different the a regular dividend in that the dividend is taxed only to the extend the amount exceeds stock basis.I need to get a handle on the stock basis calculation.I mostly work with S-corp and partnerships - basis calculation for C corp stock is the same?I think I am making this more complicated than needs be?
The buyer does not get a step-up in basis of the assets, but instead takes over the current basis, which generates more taxable income each year for them after closing.