Tax attributes of liquidating corporations Free sex chat online absolutely free
Distributions to the shareholder are not included in the shareholder’s gross income if the distribution does not exceed the shareholder’s basis in the stock.
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.
A tax attribute is one of a range of specific measures in the federal income tax calculation process that benefits the taxpayer.
It's relevant in cases when a taxpayer is insolvent or bankrupt.
This allows partners to defer recognition of gain in appreciated property that they receive from the partnership.
When a person receives bankruptcy protection and has debts discharged at the end of the bankruptcy process, she has effectively made a financial gain.The shareholder’s basis is decreased (but not below zero) by the shareholder’s share of the S corporation’s items of loss and deduction, nondeductible expenses (except expenses that are not chargeable to the capital account), depletion deduction for oil and gas property, and distributions to the shareholder that are not made from accumulated earnings and profits.This helps ensure that the shareholder only benefits once from reductions in income earned by the S corporation.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.
S corporations with accumulated earnings and profits should take advantage of this distinction by clearly identifying liquidating distributions in the documents authorizing the liquidation.Under ordinary taxation principles, the Internal Revenue Service (IRS) taxes most financial gains earned by individuals and businesses.