Liquidating company avoid tax reality tv dating shows 2016
A variation of this option is sale of the stock to an employee stock ownership plan (ESOP).
Another option is a reorganization of the corporation.
As an alternative to liquidating a C corporation, certain entities might be able to elect S corporation status or structure a tax-free divisive D reorganization.
Entities that can qualify as an S corporation can consider electing S status since, as passthrough entities, they generally would not be subject to entity-level taxes.
An S corporation that was formerly a C corporation will be subject to tax on gains from the disposition during a limited period of time (the recognition period) of appreciated assets on hand on the date the S election is effective (see Sec. Therefore, this planning opportunity is only beneficial when there are no plans to liquidate the S corporation during the recognition period after electing S status.
S corporations are subject to numerous qualification requirements and restrictions that may preclude the C corporation from qualifying as an S corporation and retaining the S status.
When assets are sold to transfer a business, the seller often takes a note.If a C corporation distributes installment notes in liquidation, it is taxed on all the deferred gain, even though cash is not yet collected.In addition, unless the note arose from a sale that occurred within 12 months of formally adopting a liquidation plan (and only if the corporation is actually liquidated in that 12-month period), the shareholder receiving the installment note is taxed on its full fair market value (FMV) in the year the note is distributed.In addition, the other costs of keeping the corporation intact should be considered, such as the administrative costs of filing necessary corporate tax returns and the continued payment of any state franchise or income taxes that might be due. 331 and 336, a corporation may consider a stock purchase with a Sec. The deemed sale by the target of its assets at FMV is a taxable transaction.The target must recognize full gain or loss upon the deemed sale of its assets under Sec. Therefore, for a purchasing corporation to achieve a step-up in basis of the target corporation's assets for future depreciation and amortization deductions, all gain must be recognized by the target as a result of the deemed sale of its assets. 338 election causes full taxation to the target corporation as if it had sold its assets at FMV, most corporations do not benefit from incurring immediate taxation in exchange for an increase in basis.