H c liquidating corporation

A liquidating corporation recognizes gain and loss upon distribution of its assets, and the shareholders receive exchange treatment of receipt of the property from the liquidating corporation.The asset distribution is treated as payment for the shareholder's stock, resulting in either a gain or loss.The purchaser may buy the stock of the shareholders and then liquidate the corporation to acquire the assets.Conversely, the purchaser may buy the assets directly from the corporation; thereafter, the corporation will distribute the sales proceeds to its shareholders.

Thus, liquidating distributions are subject to tax both at the corporate level and at the shareholder level.When property distributed in a complete liquidation is subject to a liability of the liquidating corporation, the fair market value of that property cannot be less than the amount of the liability.Losses on the distribution of property in a complete liquidation are generally recognized. The first exception applies to certain distributions to related parties pursuant to Section 267.A complete liquidation exists for tax purposes when a corporation ceases to be a going concern and exists solely to wind up its affairs, pay its debts and distribute any remaining balance to its shareholders.[1] Conversely, a legal dissolution under state law is not required for the liquidation to be complete for tax purposes.

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