Liquidating a loss corporation
Statements are normally issued to shareholders listing the fair market value of all assets distributed.
The company must file a Form 966, "Corporate Dissolution or Liquidation," with the IRS.
The tax consequences of distributions by an S corporation to a shareholder depend on the shareholder’s basis in the S corporation stock.
Distributions to the shareholder are not included in the shareholder’s gross income to the extent that the distribution does not exceed the shareholder’s basis in the stock.
The final corporate tax return is due no later than the 15th of the third full month after the dissolution, which is also the due date for any corporate income tax due.
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The corporation must recognize a gain on any appreciated property.
This is done through a system of rules that track and adjust the shareholder’s stock basis.