Liquidating cash

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Dissolution is an “administrative” termination of the corporation and while it is a usual first step, it doesn’t necessarily mean the corporation is folding.If the governing state allows dissolved corporations to retain assets, the corporation can continue to exist.

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The shareholder does not recognize and report additional income as it collects the receivable because the shareholder has already included this amount in its gain or loss computation when it received the liquidating distribution. The full amount (100%) of all distributions made after basis has been recovered are recognized as gain.Generally, shareholders are allowed to recover their entire basis before recognizing gain (Rev. On the other hand, filing a request for prompt assessment when there is only one shareholder might not be warranted. This case study has been adapted from , 25th Edition, by Albert L. Then, the shareholders are treated as exchanging their stock for the FMV of the assets distributed in complete liquidation, with the resulting gains or losses at the shareholder level.When determining whether a closely held corporation should be liquidated, the tax consequences to the shareholders should be considered.

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