Liquidating an s corp

After all assets have been distributed, if the shareholder’s stock basis is more than

This plan may be beneficial if the shareholder has enough corporation stock basis so that no gain is recognized on the distribution of the cash and the warehouse, but does not have enough basis to avoid recognition of gain on the distribution of the note. LLC3 will file IRS Form 8832 and elect to be a treated as a C corporation. After LLC3, Inc., becomes an S corporation, it will file IRS Form 8869 (Qualified Subchapter S Subsidiary Election) and elect to treat the corporation as a qualified subchapter S subsidiary (QSUB) of LLC3, Inc., which effectively liquidates corporation in a nonrecognition transaction. LLC3, Inc., should be a C corporation for just long enough to have the corporation contribute its assets into LLC3, Inc. All assets, liabilities, and items of income, deduction, and credit of a QSUB shall be treated as assets, liabilities, and items of income, deduction, and credit of the parent S corporation. §332(a), no gain or loss shall be recognized on the receipt by a corporation of property distributed in complete liquidation of another corporation.

Instead, a shareholder’s receipt of the payments on the note is treated as receipt of payment for the shareholder’s stock and he or she would not owe any taxes on the note until the shareholder actually receives each payment. If the shareholder has sufficient stock basis, then a simple liquidating distribution of all of corporation’s assets will not result in a tax liability. §453B(a)(2), if a note is distributed, gain or loss shall result to the extent of the difference between the basis of the obligation and the fair market value of the obligation at the time of distribution. If the corporation distributes the note in a nonliquidating distribution, the corporation will recognize gain to the extent that the fair market value of the note at the time of distribution exceeds the difference between the face value of the note and the amount of income the corporation would receive if the note were satisfied in full. If one or more people contribute property to a corporation solely in exchange for stock in that corporation, and immediately after the exchange the person(s) own more than 80 percent of the total combined voting power of all classes of stock entitled to vote and at least 80 percent of the total number of shares of all other classes of stock of the corporation, then neither the corporation nor the contributing person(s) will have a tax liability from that exchange. Neither the corporation nor LLC, Inc., will have a tax liability from the exchange.

If the corporation distributes the note to a shareholder in a complete liquidating distribution, and a shareholder receives the note in exchange for shareholder’s stock within 12 months of the corporation adopting a plan of liquidation, and the liquidation is completed within that 12-month period, then the shareholder’s receipt of the note is not treated as a receipt of payment for shareholder’s stock. If the corporation liquidates and distributes the assets to the shareholder, then the shareholder will have to allocate his or her stock basis among all the assets received in the liquidation, including the note that will have deferred gain, which will cause the shareholder to recognize more gain on the cash and warehouse because less basis is allocated to those assets. §453B(b), the basis of the note shall be the excess of the face value of the note over an amount equal to the income that would be returnable were the obligation satisfied in full. §351, no gain or loss shall be recognized if property is transferred to a corporation by one or more persons solely in exchange for stock in the corporation, and immediately after the exchange, the person or persons own more than 80 percent of the total combined voting power of all classes of stock entitled to vote and at least 80 percent of the total number of shares of all other classes of stock of the corporation. When the corporation contributes the warehouse into LLC, Inc., solely in exchange for stock, the corporation’s LLC, Inc., stock basis will be the basis of the warehouse minus the fair market value of any other property (except money) received by corporation, the amount of any money received by corporation, and the amount of loss to corporation, which was recognized on such exchange, plus the amount that was treated as a dividend, and the amount of gain to the corporation that was recognized on such exchange (not including any portion of such gain, which was treated as a dividend).

having corporation contribute the note into LLC2, Inc., instead of distributing the note to the shareholder, we avoid the consequences of I. Plan Three In this plan, we form a new limited liability company (LLC3). LLC3, Inc., will then elect to be treated as an S corporation. Because only S corporations can elect to treat another corporation as a QSUB, LLC3, Inc., would have to file another IRS Form 8832 to elect to classify itself as an S corporation. §1361(b)(3)(A), a QSUB must not be treated as a separate corporation.

After the contribution, the corporation will sell its LLC2, Inc., stock to the shareholder, and the shareholder will then be the 100 percent owner of LLC2, Inc., the owner of the note. §453 and §453B, which would result in gain being recognized by both the corporation and shareholder. §1361(b)(3)(B), a QSUB is a domestic corporation in which 100 percent of the stock of such corporation is held by an S corporation, and the S corporation elects to treat such corporation as a QSUB.

, there will be a capital loss in the amount by which the stock basis exceeds

After all assets have been distributed, if the shareholder’s stock basis is more than

This plan may be beneficial if the shareholder has enough corporation stock basis so that no gain is recognized on the distribution of the cash and the warehouse, but does not have enough basis to avoid recognition of gain on the distribution of the note. LLC3 will file IRS Form 8832 and elect to be a treated as a C corporation. After LLC3, Inc., becomes an S corporation, it will file IRS Form 8869 (Qualified Subchapter S Subsidiary Election) and elect to treat the corporation as a qualified subchapter S subsidiary (QSUB) of LLC3, Inc., which effectively liquidates corporation in a nonrecognition transaction. LLC3, Inc., should be a C corporation for just long enough to have the corporation contribute its assets into LLC3, Inc. All assets, liabilities, and items of income, deduction, and credit of a QSUB shall be treated as assets, liabilities, and items of income, deduction, and credit of the parent S corporation. §332(a), no gain or loss shall be recognized on the receipt by a corporation of property distributed in complete liquidation of another corporation.

Instead, a shareholder’s receipt of the payments on the note is treated as receipt of payment for the shareholder’s stock and he or she would not owe any taxes on the note until the shareholder actually receives each payment. If the shareholder has sufficient stock basis, then a simple liquidating distribution of all of corporation’s assets will not result in a tax liability. §453B(a)(2), if a note is distributed, gain or loss shall result to the extent of the difference between the basis of the obligation and the fair market value of the obligation at the time of distribution. If the corporation distributes the note in a nonliquidating distribution, the corporation will recognize gain to the extent that the fair market value of the note at the time of distribution exceeds the difference between the face value of the note and the amount of income the corporation would receive if the note were satisfied in full. If one or more people contribute property to a corporation solely in exchange for stock in that corporation, and immediately after the exchange the person(s) own more than 80 percent of the total combined voting power of all classes of stock entitled to vote and at least 80 percent of the total number of shares of all other classes of stock of the corporation, then neither the corporation nor the contributing person(s) will have a tax liability from that exchange. Neither the corporation nor LLC, Inc., will have a tax liability from the exchange.

If the corporation distributes the note to a shareholder in a complete liquidating distribution, and a shareholder receives the note in exchange for shareholder’s stock within 12 months of the corporation adopting a plan of liquidation, and the liquidation is completed within that 12-month period, then the shareholder’s receipt of the note is not treated as a receipt of payment for shareholder’s stock. If the corporation liquidates and distributes the assets to the shareholder, then the shareholder will have to allocate his or her stock basis among all the assets received in the liquidation, including the note that will have deferred gain, which will cause the shareholder to recognize more gain on the cash and warehouse because less basis is allocated to those assets. §453B(b), the basis of the note shall be the excess of the face value of the note over an amount equal to the income that would be returnable were the obligation satisfied in full. §351, no gain or loss shall be recognized if property is transferred to a corporation by one or more persons solely in exchange for stock in the corporation, and immediately after the exchange, the person or persons own more than 80 percent of the total combined voting power of all classes of stock entitled to vote and at least 80 percent of the total number of shares of all other classes of stock of the corporation. When the corporation contributes the warehouse into LLC, Inc., solely in exchange for stock, the corporation’s LLC, Inc., stock basis will be the basis of the warehouse minus the fair market value of any other property (except money) received by corporation, the amount of any money received by corporation, and the amount of loss to corporation, which was recognized on such exchange, plus the amount that was treated as a dividend, and the amount of gain to the corporation that was recognized on such exchange (not including any portion of such gain, which was treated as a dividend).

having corporation contribute the note into LLC2, Inc., instead of distributing the note to the shareholder, we avoid the consequences of I. Plan Three In this plan, we form a new limited liability company (LLC3). LLC3, Inc., will then elect to be treated as an S corporation. Because only S corporations can elect to treat another corporation as a QSUB, LLC3, Inc., would have to file another IRS Form 8832 to elect to classify itself as an S corporation. §1361(b)(3)(A), a QSUB must not be treated as a separate corporation.

After the contribution, the corporation will sell its LLC2, Inc., stock to the shareholder, and the shareholder will then be the 100 percent owner of LLC2, Inc., the owner of the note. §453 and §453B, which would result in gain being recognized by both the corporation and shareholder. §1361(b)(3)(B), a QSUB is a domestic corporation in which 100 percent of the stock of such corporation is held by an S corporation, and the S corporation elects to treat such corporation as a QSUB.

, there will be a capital loss in the amount by which the stock basis exceeds [[

After all assets have been distributed, if the shareholder’s stock basis is more than $0, there will be a capital loss in the amount by which the stock basis exceeds $0, and that loss can be used to offset any capital gains incurred in other distributions. §1239 applies when depreciable property is sold or exchanged, directly or indirectly, between related persons and treats any gain recognized in that sale or exchange as ordinary income. However, if the stock basis is depleted before the corporation distributes all of its assets, then any subsequent distributions will result in taxable gain to the extent there is gain recognized in those subsequent distributions. When a corporation distributes an asset to a shareholder, the shareholder’s stock basis increases by the gain recognized in that distribution and decreases by the fair market value of the asset being distributed. §336, unless the liquidation is part of a reorganization plan, gain or loss is recognized to a liquidating corporation upon the distribution of property in complete liquidation as if the property were being sold to the distributee at its fair market value.

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After all assets have been distributed, if the shareholder’s stock basis is more than $0, there will be a capital loss in the amount by which the stock basis exceeds $0, and that loss can be used to offset any capital gains incurred in other distributions. §1239 applies when depreciable property is sold or exchanged, directly or indirectly, between related persons and treats any gain recognized in that sale or exchange as ordinary income.

However, if the stock basis is depleted before the corporation distributes all of its assets, then any subsequent distributions will result in taxable gain to the extent there is gain recognized in those subsequent distributions.

When a corporation distributes an asset to a shareholder, the shareholder’s stock basis increases by the gain recognized in that distribution and decreases by the fair market value of the asset being distributed. §336, unless the liquidation is part of a reorganization plan, gain or loss is recognized to a liquidating corporation upon the distribution of property in complete liquidation as if the property were being sold to the distributee at its fair market value.

Liquidating Without Tax Planning In general, pursuant to I. If the shareholder’s stock basis is large enough, the corporation can liquidate and incur no tax liability because the shareholder’s stock basis will not be depleted, only reduced, in the liquidating distributions.

The corporation will recognize gain to the extent that its basis in the LLC, Inc., stock, which is the basis of the warehouse, as adjusted by I. The gain recognized, if any, will be capital gain and, because we are not selling or exchanging the warehouse (we are selling stock, which is nondepreciable property), in the entity that owns the warehouse, we can avoid I.

The shareholder’s basis in the LLC, Inc., stock will be the purchase price of the stock. §358(a), that it transferred to LLC, Inc., in exchange for the stock, exceeds the purchase price in the sale to shareholder.

§331(a), amounts received by a noncorporate shareholder in a distribution in complete liquidation of a corporation shall be treated as in-full payment in exchange for the stock. The cash distribution will not cause gain to the extent the shareholder’s stock basis in the corporation exceeds the amount of cash distributed. The effective date of this election will be the day before the effective date of the deed transfer of the warehouse from corporation to LLC, Inc., so that the warehouse transfer to LLC, Inc., can be treated as an I.

]], and that loss can be used to offset any capital gains incurred in other distributions. §1239 applies when depreciable property is sold or exchanged, directly or indirectly, between related persons and treats any gain recognized in that sale or exchange as ordinary income. However, if the stock basis is depleted before the corporation distributes all of its assets, then any subsequent distributions will result in taxable gain to the extent there is gain recognized in those subsequent distributions. When a corporation distributes an asset to a shareholder, the shareholder’s stock basis increases by the gain recognized in that distribution and decreases by the fair market value of the asset being distributed. §336, unless the liquidation is part of a reorganization plan, gain or loss is recognized to a liquidating corporation upon the distribution of property in complete liquidation as if the property were being sold to the distributee at its fair market value.

, and that loss can be used to offset any capital gains incurred in other distributions. §1239 applies when depreciable property is sold or exchanged, directly or indirectly, between related persons and treats any gain recognized in that sale or exchange as ordinary income.

However, if the stock basis is depleted before the corporation distributes all of its assets, then any subsequent distributions will result in taxable gain to the extent there is gain recognized in those subsequent distributions.

When a corporation distributes an asset to a shareholder, the shareholder’s stock basis increases by the gain recognized in that distribution and decreases by the fair market value of the asset being distributed. §336, unless the liquidation is part of a reorganization plan, gain or loss is recognized to a liquidating corporation upon the distribution of property in complete liquidation as if the property were being sold to the distributee at its fair market value.

Liquidating Without Tax Planning In general, pursuant to I. If the shareholder’s stock basis is large enough, the corporation can liquidate and incur no tax liability because the shareholder’s stock basis will not be depleted, only reduced, in the liquidating distributions.

The corporation will recognize gain to the extent that its basis in the LLC, Inc., stock, which is the basis of the warehouse, as adjusted by I. The gain recognized, if any, will be capital gain and, because we are not selling or exchanging the warehouse (we are selling stock, which is nondepreciable property), in the entity that owns the warehouse, we can avoid I.

The shareholder’s basis in the LLC, Inc., stock will be the purchase price of the stock. §358(a), that it transferred to LLC, Inc., in exchange for the stock, exceeds the purchase price in the sale to shareholder.

§331(a), amounts received by a noncorporate shareholder in a distribution in complete liquidation of a corporation shall be treated as in-full payment in exchange for the stock. The cash distribution will not cause gain to the extent the shareholder’s stock basis in the corporation exceeds the amount of cash distributed. The effective date of this election will be the day before the effective date of the deed transfer of the warehouse from corporation to LLC, Inc., so that the warehouse transfer to LLC, Inc., can be treated as an I.

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This plan may be beneficial if the shareholder has enough corporation stock basis so that no gain is recognized on the distribution of the cash and the warehouse, but does not have enough basis to avoid recognition of gain on the distribution of the note. LLC3 will file IRS Form 8832 and elect to be a treated as a C corporation. After LLC3, Inc., becomes an S corporation, it will file IRS Form 8869 (Qualified Subchapter S Subsidiary Election) and elect to treat the corporation as a qualified subchapter S subsidiary (QSUB) of LLC3, Inc., which effectively liquidates corporation in a nonrecognition transaction. LLC3, Inc., should be a C corporation for just long enough to have the corporation contribute its assets into LLC3, Inc. All assets, liabilities, and items of income, deduction, and credit of a QSUB shall be treated as assets, liabilities, and items of income, deduction, and credit of the parent S corporation. §332(a), no gain or loss shall be recognized on the receipt by a corporation of property distributed in complete liquidation of another corporation.

Instead, a shareholder’s receipt of the payments on the note is treated as receipt of payment for the shareholder’s stock and he or she would not owe any taxes on the note until the shareholder actually receives each payment. If the shareholder has sufficient stock basis, then a simple liquidating distribution of all of corporation’s assets will not result in a tax liability. §453B(a)(2), if a note is distributed, gain or loss shall result to the extent of the difference between the basis of the obligation and the fair market value of the obligation at the time of distribution. If the corporation distributes the note in a nonliquidating distribution, the corporation will recognize gain to the extent that the fair market value of the note at the time of distribution exceeds the difference between the face value of the note and the amount of income the corporation would receive if the note were satisfied in full. If one or more people contribute property to a corporation solely in exchange for stock in that corporation, and immediately after the exchange the person(s) own more than 80 percent of the total combined voting power of all classes of stock entitled to vote and at least 80 percent of the total number of shares of all other classes of stock of the corporation, then neither the corporation nor the contributing person(s) will have a tax liability from that exchange. Neither the corporation nor LLC, Inc., will have a tax liability from the exchange.

If the corporation distributes the note to a shareholder in a complete liquidating distribution, and a shareholder receives the note in exchange for shareholder’s stock within 12 months of the corporation adopting a plan of liquidation, and the liquidation is completed within that 12-month period, then the shareholder’s receipt of the note is not treated as a receipt of payment for shareholder’s stock. If the corporation liquidates and distributes the assets to the shareholder, then the shareholder will have to allocate his or her stock basis among all the assets received in the liquidation, including the note that will have deferred gain, which will cause the shareholder to recognize more gain on the cash and warehouse because less basis is allocated to those assets. §453B(b), the basis of the note shall be the excess of the face value of the note over an amount equal to the income that would be returnable were the obligation satisfied in full. §351, no gain or loss shall be recognized if property is transferred to a corporation by one or more persons solely in exchange for stock in the corporation, and immediately after the exchange, the person or persons own more than 80 percent of the total combined voting power of all classes of stock entitled to vote and at least 80 percent of the total number of shares of all other classes of stock of the corporation. When the corporation contributes the warehouse into LLC, Inc., solely in exchange for stock, the corporation’s LLC, Inc., stock basis will be the basis of the warehouse minus the fair market value of any other property (except money) received by corporation, the amount of any money received by corporation, and the amount of loss to corporation, which was recognized on such exchange, plus the amount that was treated as a dividend, and the amount of gain to the corporation that was recognized on such exchange (not including any portion of such gain, which was treated as a dividend).

having corporation contribute the note into LLC2, Inc., instead of distributing the note to the shareholder, we avoid the consequences of I. Plan Three In this plan, we form a new limited liability company (LLC3). LLC3, Inc., will then elect to be treated as an S corporation. Because only S corporations can elect to treat another corporation as a QSUB, LLC3, Inc., would have to file another IRS Form 8832 to elect to classify itself as an S corporation. §1361(b)(3)(A), a QSUB must not be treated as a separate corporation.

After the contribution, the corporation will sell its LLC2, Inc., stock to the shareholder, and the shareholder will then be the 100 percent owner of LLC2, Inc., the owner of the note. §453 and §453B, which would result in gain being recognized by both the corporation and shareholder. §1361(b)(3)(B), a QSUB is a domestic corporation in which 100 percent of the stock of such corporation is held by an S corporation, and the S corporation elects to treat such corporation as a QSUB.

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This plan may be beneficial if the shareholder has enough corporation stock basis so that no gain is recognized on the distribution of the cash and the warehouse, but does not have enough basis to avoid recognition of gain on the distribution of the note. LLC3 will file IRS Form 8832 and elect to be a treated as a C corporation. After LLC3, Inc., becomes an S corporation, it will file IRS Form 8869 (Qualified Subchapter S Subsidiary Election) and elect to treat the corporation as a qualified subchapter S subsidiary (QSUB) of LLC3, Inc., which effectively liquidates corporation in a nonrecognition transaction. LLC3, Inc., should be a C corporation for just long enough to have the corporation contribute its assets into LLC3, Inc. All assets, liabilities, and items of income, deduction, and credit of a QSUB shall be treated as assets, liabilities, and items of income, deduction, and credit of the parent S corporation. §332(a), no gain or loss shall be recognized on the receipt by a corporation of property distributed in complete liquidation of another corporation. Instead, a shareholder’s receipt of the payments on the note is treated as receipt of payment for the shareholder’s stock and he or she would not owe any taxes on the note until the shareholder actually receives each payment. If the shareholder has sufficient stock basis, then a simple liquidating distribution of all of corporation’s assets will not result in a tax liability. §453B(a)(2), if a note is distributed, gain or loss shall result to the extent of the difference between the basis of the obligation and the fair market value of the obligation at the time of distribution. If the corporation distributes the note in a nonliquidating distribution, the corporation will recognize gain to the extent that the fair market value of the note at the time of distribution exceeds the difference between the face value of the note and the amount of income the corporation would receive if the note were satisfied in full. If one or more people contribute property to a corporation solely in exchange for stock in that corporation, and immediately after the exchange the person(s) own more than 80 percent of the total combined voting power of all classes of stock entitled to vote and at least 80 percent of the total number of shares of all other classes of stock of the corporation, then neither the corporation nor the contributing person(s) will have a tax liability from that exchange. Neither the corporation nor LLC, Inc., will have a tax liability from the exchange. If the corporation distributes the note to a shareholder in a complete liquidating distribution, and a shareholder receives the note in exchange for shareholder’s stock within 12 months of the corporation adopting a plan of liquidation, and the liquidation is completed within that 12-month period, then the shareholder’s receipt of the note is not treated as a receipt of payment for shareholder’s stock. If the corporation liquidates and distributes the assets to the shareholder, then the shareholder will have to allocate his or her stock basis among all the assets received in the liquidation, including the note that will have deferred gain, which will cause the shareholder to recognize more gain on the cash and warehouse because less basis is allocated to those assets. §453B(b), the basis of the note shall be the excess of the face value of the note over an amount equal to the income that would be returnable were the obligation satisfied in full. §351, no gain or loss shall be recognized if property is transferred to a corporation by one or more persons solely in exchange for stock in the corporation, and immediately after the exchange, the person or persons own more than 80 percent of the total combined voting power of all classes of stock entitled to vote and at least 80 percent of the total number of shares of all other classes of stock of the corporation. When the corporation contributes the warehouse into LLC, Inc., solely in exchange for stock, the corporation’s LLC, Inc., stock basis will be the basis of the warehouse minus the fair market value of any other property (except money) received by corporation, the amount of any money received by corporation, and the amount of loss to corporation, which was recognized on such exchange, plus the amount that was treated as a dividend, and the amount of gain to the corporation that was recognized on such exchange (not including any portion of such gain, which was treated as a dividend). having corporation contribute the note into LLC2, Inc., instead of distributing the note to the shareholder, we avoid the consequences of I. Plan Three In this plan, we form a new limited liability company (LLC3). LLC3, Inc., will then elect to be treated as an S corporation. Because only S corporations can elect to treat another corporation as a QSUB, LLC3, Inc., would have to file another IRS Form 8832 to elect to classify itself as an S corporation. §1361(b)(3)(A), a QSUB must not be treated as a separate corporation. After the contribution, the corporation will sell its LLC2, Inc., stock to the shareholder, and the shareholder will then be the 100 percent owner of LLC2, Inc., the owner of the note. §453 and §453B, which would result in gain being recognized by both the corporation and shareholder. §1361(b)(3)(B), a QSUB is a domestic corporation in which 100 percent of the stock of such corporation is held by an S corporation, and the S corporation elects to treat such corporation as a QSUB.

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