H c liquidating corporation
It must be stated that a cardinal rule of taxation is that the taxpayer must furnish evidence on the adjusted basis of the stock.Otherwise, the stock will be deemed to have a zero basis, and the full amount of the liquidation proceeds represents the amount of the gain to be recognized.The general expenses involved in liquidating a corporation are deductible to the corporation as business expenses under Section 162, including legal and accounting expenses and expenses relating to the disposition of corporate assets.A copy of the minutes of the shareholders' meeting in which the plan of liquidation was adopted must be attached to the final corporate income tax return for the liquidating corporation.For the corporation in the process of complete liquidation, Sections 336 and 337 govern the tax results.The general rules relating to complete liquidations are covered in Section 336 which provides that gain or loss is recognized to the distributing corporation.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.
Thus, the loss is disallowed even if the property distribution is to an unrelated party.
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.
Information returns Form 1099) must be transmitted to each shareholder on or before January 31 of the year following the liquidation.
in addition, Form 1096 which notifies shareholders of their respective gains or losses must be sent to the IRS by February 28.