Liquidating distribution to shareholders Nudechat australia
I think I am making this more complicated than needs be?
Except as provided in subparagraph (B), that portion of the distribution which is not a dividend, to the extent that it exceeds the adjusted basis of the stock, shall be treated as gain from the sale or exchange of property.
The liquidator is not required to hold a meeting of shareholders during a creditors’ voluntary liquidation.
A joint meeting of the creditors and shareholders must be held at the conclusion of the winding up.
The shareholders rank behind the creditors and are unlikely to receive any dividend in an insolvent liquidation unless they also have a claim as a creditor.
In a court liquidation, the liquidator is not required to report to the shareholders on the progress or outcome of the 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.
Each shareholder owns 100 shares of XYZ Inc stock @ 0 per share. After 5 years, one of the shareholders wants to leave the corporation and requests the corporation to buy back his 100 shares for 12K.
This difference has income tax implications to shareholders.
While regular dividends are taxable, liquidating dividends are not taxable since they are merely the return of the shareholder's investments.
So what happens if a corporation (C Corp or S Corp) distributes property or stock other than cash to a departing shareholder?
The corporation will recognized gain (not loss) if the fair market value (FMV) of the property exceeds its adjusted cost basis (Sec. The depreciation recapture of certain capital assets will trigger ordinary income and/or special unrecaptured sec. Basically the non-cash distribution is treated as if the corporation (C Corp or S Corp) had sold that property to the exiting shareholder. Unfortunately, a corporation (C Corp or S Corp) cannot recognize any losses on a distribution of appreciated property (i.e., where the property’s FMV is less than the adjusted cost basis).