R3- Corporate Liquidation Flashcards
1
Q
Corporate Liquidation taxation effect
A
Double Taxation
2
Q
Two types of liquidation are?
A
- Corporation sells assets and distributes cash
2. Corporation distributes assets to the shareholders
3
Q
What happens if Corporation sells assets and distributes cash?
How is it taxed?
A
- Corporation recognizes gain on sale of assets
SP of Assets
- Basis
=Gain or loss - Shareholder recognizes gain to the extent of basis of stock
Proceeds
- Basis
=Gain or Loss
4
Q
What happens if Corp distributes assets?
A
- Corporation recognizes gain or loss as if it is sold for FMV
FMV
-Basis
=gain or loss - Shareholder recognize gain or loss to the extent of FMV of assets rec’d exceeds the basis
SP
-Stock Basis
=Gain or Loss
5
Q
What is tax free reorganization?
A
- Some part of company will continue
- Parent subsidiary liquidation
- Non-taxable for Corp and Shareholder
6
Q
What are rules for Worthless Stock- Section 1244 Stock ?
A
- When a stock becomes worthless
- an original stockholder can be treated as ordinary loss- fully tax deductible, instead of capital loss
- Upto 50,000 Single, 100,000 for MFJ
- Any loss in excess would offset capital gains
- Max of 3000 per year
7
Q
Small Business Stock-
A
a non corporate shareholder
who holds qualified small business stock for more than 5 yrs
may generally exclude 50%
of the gain on sale of such stock