Case study: A, an individual, owns a building with a basis of 0,000 and a fair market value of
Case study: A, an individual, owns a building with a basis of $400,000 and a fair market value of $1,000,000.B, another individual, owns business assets worth $1,000,000.Witness the situation described in recent letter from the Internal Revenue Service (LTR 200806006, November 7, 2007), which addresses a seeming anomaly related to the tax code.The anomaly is corporate dissolution without liquidation.This corp is new to me - but I have worked with the shareholders individually and to my knowledge only one dividend has been paid, a 1099-DIV was prepared and distributed.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.The adjusted basis for determining the gain or loss from the sale or other disposition of property, whenever acquired, shall be the basis (determined under section 1012 or other applicable sections of this subchapter and subchapters C (relating to corporate distributions and adjustments), K (relating to partners and partnerships), and P (relating to capital gains and losses)), adjusted as provided in section 1016.The C Corp I am working with just went thru an asset sale of the company and will report the gain on sale. After all entries are made, gain on sale, taxes paid, etc we have left common stock and retained earnings. The basis of property shall be the cost of such property, except as otherwise provided in this subchapter and subchapters C (relating to corporate distributions and adjustments), K (relating to partners and partnerships), and P (relating to capital gains and losses).||
Case study: A, an individual, owns a building with a basis of $400,000 and a fair market value of $1,000,000.,000,000.
I mostly work with S-corp and partnerships - basis calculation for C corp stock is the same?
In the ruling, a corporate taxpayer had been incorporated in a state on a particular date, let’s say January 19, 2007.
The company was “administratively dissolved” some time after, for example, effective January 25, 2008, due to its failure to timely pay state franchise taxes.
At issue is whether the company’s status as a corporation had been terminated by the administrative dissolution. Something else to consider is that under Section 336(a) of the tax code, a gain or loss is recognized by a liquidating corporation on the distribution of its property in complete liquidation, as if such property were sold to the distributee at its fair market value. 142 ) states that “…where a corporation ceases business operations, has retained no assets, has no income, and has actually liquidated, there is in effect a de facto dissolution, even though the corporation has not been formally dissolved…” In addition, it is entirely possible for the corporation to continue in existence even though it has been, as a matter of state law, dissolved.
If it is considered terminated, the company would have been viewed as having completely liquidated, and both it and its shareholders would have experienced the tax consequences attendant to the situation. In other words, in most cases, the liquidation of a corporation commonly engenders two levels of taxation: tax will be imposed at both the corporate and distributee shareholder levels.* The De Facto Company Closure A complete liquidation is not always accompanied by a formal or legal company shutdown. Thus, unless dissolution brings about an automatic transfer of the corporation’s assets to its shareholders, the corporation, even though dissolved, continues its existence.