9.5 - Corporate Tax Special Topics - Complete Liquidation Flashcards
Complete Liquidation - Corporate Gains
How does a corporation recognize any gain or loss realized on distributions in complete liquidation?
As if the property were sold at its FMV to the shareholder immediately before its distribution
Complete Liquidation - Corporate Losses
How is gain or loss computed?
On an asset by asset basis
Complete Liquidation - Corporate Gains
True or False >>> FMV of distributed property is treated as not less than related liabilities that the shareholder assumes or to which the property is subject.
True
Complete Liquidation - Corporate Gains
True or False >>> FMV of distributed property is treated as not less than related liabilities that the shareholder assumes or to which the property is subject.
True
Complete Liquidation - Corporate Gains
What does the character of amounts recognized depend on?
The nature of the asset in the hands of the distributing corporation (sections 1245 and 1250)
Complete Liquidation - Corporate Losses
True or False >>> a corporation generally recognizes any losses realized on liquidating distributions.
True
Complete Liquidation - Corporate Losses
When are certain losses not recognized?
When the distributee shareholder is related to the corporation
Complete Liquidation - Corporate Losses
What is a typical related distributee?
A more than 50% shareholder actually or constructively
Complete Liquidation - Corporate Losses
True or False >>> applicable distributions are of assets non-pro rata or acquired within 5 years by a contribution to capital or a section 351 exchange and permanent disallowance results, even if post-contribution.
True
Complete Liquidation - Corporate Losses
Pre-contribution loss >> Does the amount of a loss inherent on a contribution reduce loss recognized on distribution?
Yes
Complete Liquidation - Corporate Losses
Define applicable dispositions for corporate losses?
Assets a liquidating corporation distributes, sells, or exchanges that were acquired by a contribution to capital or by a section 351 exchange when it’s AB exceeded FMV for the principal purpose of recognizing the loss on liquidation
Complete Liquidation - Corporate Losses
What is a requirement of the loss limit operations?
The basis for computing the amount of loss be reduced by loss inherent on contribution
Complete Liquidation - Corporate Losses
True or False >>> unused, unexpired, NOLs, capital losses, and charitable contribution carryover amounts for corporate loses are carried forward 10 years.
False – carryover amounts are lost
Complete Liquidation - Shareholder Treatment
How do shareholders treat amounts distributed in complete liquidation?
As realized in exchange for stock
Complete Liquidation - Shareholder Treatment
Is capital recovery to the extent of basis permitted?
Yes – before recognizing gain or loss
