《税收概述》（英文版） chapter 6 corporate Liquidating

ter Gt Borate acidating distributions

1 Chapter 6: Corporate Liquidating Distributions

LIQUIDATING DISTRIBUTIONS Complete liquidation vs. dissolution Effects of liquidation on shareholders Effects of liquidation on liquidating corporation Liquidation of a controlled subsidiary Special shareholder issues Debt retirement

2 LIQUIDATING DISTRIBUTIONS Complete liquidation vs. dissolution Effects of liquidation on shareholders Effects of liquidation on liquidating corporation Liquidation of a controlled subsidiary Special shareholder issues Debt retirement

Complete Liquidation VS Dissolution (1 of 3) Complete liquidation Completely cancel or redeem all of corp's stock in accordance with plan of liquidation OR One of a series of distributions in accordance with plan of liquidation 3

3 Complete Liquidation vs. Dissolution(1 of 3) Complete liquidation –Completely cancel or redeem all of corp’s stock in accordance with plan of liquidation OR –One of a series of distributions in accordance with plan of liquidation

Complete Liquidation VS Dissolution (2 of 3) Liquidation status Corporation ceases to be going concern Activities for purpose of winding up its affairs, paying debts, distributing remaining property to shareholders Retention of nominal assets does not alter liquidation status

4 Complete Liquidation vs. Dissolution(2 of 3) Liquidation status –Corporation ceases to be going concern –Activities for purpose of winding up its affairs, paying debts, & distributing remaining property to shareholders –Retention of nominal assets does not alter liquidation status

Complete Liquidation VS Dissolution (3 of 3) Dissolution of corporation A legal action that requires corporation to surrender its charter to the state Possible to liquidate corporation without dissolving it Dissolution frees corporate name for use by others 5

5 Complete Liquidation vs. Dissolution(3 of 3) Dissolution of corporation –A legal action that requires corporation to surrender its charter to the state –Possible to liquidate corporation without dissolving it –Dissolution frees corporate name for use by others

Effects of Liquidation on Liquidating Shareholders Amount of recognized gain or loss Character of gain or loss Basis of property received by shareholder 6

6 Effects of Liquidation on Liquidating Shareholders Amount of recognized gain or loss Character of gain or loss Basis of property received by shareholder

Amount of Recognized Gain/Loss Shareholder assumed to have sold stock for FMv of net assets received FMV of assets-liabilities received Basis of stock surrendered Amount of gain(loss) recognized

7 Amount of Recognized Gain/Loss Shareholder assumed to have sold stock for FMV of net assets received FMV of assets - liabilities received - Basis of stock surrendered = Amount of gain (loss) recognized

Character of Gain/Loss General rule Gain or loss treated as capital transaction Exceptions 81244 stock receives ordinary loss treatment(subject to limitations) Losses sustained by a parent in a worthless stock investment in a controlled subsidiary receive ordinary loss treatment 8

8 Character of Gain/Loss General rule –Gain or loss treated as capital transaction Exceptions –§1244 stock receives ordinary loss treatment (subject to limitations) – Losses sustained by a parent in a worthless stock investment in a controlled subsidiary receive ordinary loss treatment

Basis of Property Received by Shareholder General liquidation rules Basis of property received is FMV on distribution date Holding period starts day after distribution date 9

9 Basis of Property Received by Shareholder General liquidation rules –Basis of property received is FMV on distribution date –Holding period starts day after distribution date

Effects of Liquidation on Liquidating Corporation Recognition of gains/losses Liabilities assumed by shareholders Exceptions to general rule 10

10 Effects of Liquidation on Liquidating Corporation Recognition of gains/losses Liabilities assumed by shareholders Exceptions to general rule