Liquidating dividend s corporation

Posted by / 21-Jan-2020 13:15

Liquidating dividend s corporation

This provides the legal authorization to dissolve the corporation.

Record the vote in the meeting minutes which are added to formal corporate records.

Like C corporations, S corporations recognize no gain or loss on a distribution of cash to its shareholders.

To the extent that the shareholder has basis in the S corporation stock, distributions to the shareholder are tax free.

By contrast, liquidating distributions are treated as though the shareholder had sold her S corporation stock to the S corporation in exchange for the distribution from the S corporation. Note: Since the ordinary distribution rules do not apply, the S corporation’s accumulated earnings and profits or accumulated adjustments accounts do not determine the character of the distribution.

If the S corporation distributes appreciated property to a shareholder, the corporation must recognize gain as if the property were sold to the shareholder at fair market value.

Liquidating distributions are not governed by the normal S corporation distribution rules.

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Because the tax consequences of distributions depend on the shareholder’s basis, it is important to keep up with changes in the shareholder’s basis over time.

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