Tax implications liquidating corporation
The buyer will typically price these differences in tax treatment in their offer.However, these tax implications can be avoidable if you plan ahead to mitigate liabilities.Forming a C corporation was once the only way the owner of a small business could shield himself from the debts and liabilities of the company.Other forms of ownership, such as limited liability partnerships, have replaced the traditional C corporation structure for many small businesses.
Instead, you will be treated as the owner of your pro rata portion of each asset, including cash, received by and held by the liquidating trust. stockholder who itemizes deductions generally may deduct his pro rata share of fees and expenses of the liquidating trust only to the extent that such amount, together with the U. stockholders other miscellaneous deductions, exceeds 2% of his adjusted gross income. Any such gain or loss will be capital gain or loss so long as the U. stockholder holds his interest in the assets as a capital asset.
A limited liability company, or LLC, has significant tax advantages over a C corporation.
A C corporation pays corporate income tax on its earnings, and then shareholders pay personal income tax on distributions.
Depreciation is recaptured on the basis of the fair market value of the assets.
However, loss on depreciated property is also recognized.