Liquidating a company to avoid tax
In any case, you could make someone a new shareholder this year if that is the deal, but you're going to have to justify your treatment then, because if no stock was issued and nothing was paid in for ownership, then it's either a gift or compensation as you note.
Is this a gift and everyone agrees, as is to happen (have happened)?
based on percentage of ownership and contributions to the corp, loans etc.
I mostly work with S-corp and partnerships - basis calculation for C corp stock is the same?
(2) This deemed sale can present valuation problems if not an arm's-length transaction.
This article will discuss the issues connected with the liquidation of a corporation--valuation of assets, limitations on losses for certain liquidating distributions and other problem areas--and offer planning opportunities and techniques to minimize the overall tax consequences of a liquidation. 336(a) provides, in general, that a liquidating corporation will recognize gain or loss on the distribution of its property in a complete liquidation as if the property were sold to its shareholders at FMV.
I need to get a handle on the stock basis calculation.
The information you gave me yesterday was so helpfull. It can almost become a legal question too depending on how much fighting between family members goes on...
Before the Tax Reform Act of 1986 (TRA) was enacted, a corporation generally did not recognize any gain or loss on the distribution of property in liquidation, or from corporate asset sales conducted pursuant to a plan of liquidation.
(1) Corporate assets sales are now fully taxable, and distributions in liquidation are treated as a deemed sale of property between the corporation and its shareholders for fair market value (FMV) on the date of distribution.
This is for 'regular' or non-liquidating distributions in general.
The corp is sold and no longer doing business, so the liquidating dividend would be a sale of stock.
We don't want to loose the 1202 stock over this one.