Liquidating s corp
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 no AE&P or the distribution is less than the AAA balance, a Sec.Planning tip: If the stock surrendered in the liquidation qualifies as Sec. Thus, accumulated earnings and profits (AE&P) or accumulated adjustments accounts (AAA) are not relevant to the characterization of the liquidating distribution.1244 stock, the shareholder may be able to claim an ordinary loss rather than a capital loss. 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 of directors resolution adopting the plan of complete liquidation).Basis is not affected by the shareholder's assuming corporate liabilities or receiving corporate property that is subject to a liability (See. Structuring a Partial Liquidation for Best Tax Results A distribution in partial liquidation of the S corporation will also qualify for sale or exchange treatment under Sec.
You may qualify for the 0% tax rate on long-term capital gains (see page D-10 of the Schedule D instructions to figure your tax), so maybe you will not be taxed on this.
This mainly occurs during voluntary liquidations of solvent corporations.
The shareholder consequences of a complete liquidation of an S corporation are governed by Secs. The dividend rules that otherwise apply to corporate distributions are not applicable to distributions in complete liquidation.
The ,000 is allocated pro rata to the two blocks, so ,000 is allocated to Block 1 (10/30 x ,000) and ,000 to Block 2 (20/30 x ,000).
T recognizes a ,000 gain on Block 1 (,000 - ,000 basis) and a ,000 loss on Block 2 (,000 - ,000 basis).