Liquidating distributions corporation


28-Mar-2019 15:00

A has held his stock for three years, and his stock basis is ,000. The corporation cannot afford to redeem the stock entirely for cash because its cash balance of ,000 must be used primarily to service real estate debt.

However, the shareholders agree that J can distribute one of the tracts of land to A (see the exhibit).

In this case, are you saying that no 1099-DIV (Box 8) is required?

That is, the liquidating distribution will only be reported on the Sch. Thanks, Ricky People come to Accountants Community for help and answers—we want to let them know that we're here to listen and share our knowledge.

E does not care what assets she receives as long as they have a total value of 5,000. However, the shareholders have agreed to distribute a parcel of land held for investment purposes and stock in a publicly traded company, I, Inc., to redeem E's shares.

The land has an FMV of 5,000 and basis of 0,000, while the stock has an FMV of ,000 and basis of ,000.

Since the corporation must compute its gains and losses on an asset-by-asset basis, H would have a recognized gain of ,000 from the land and an unrecognized loss of ,000 from the I stock, if those assets were transferred to redeem E's shares.

Instead of distributing the I stock, the corporation should sell it and distribute the resulting sales proceeds to E.

Since all of A's shares would be redeemed, and because he is unrelated to the remaining shareholders, the redemption would qualify for stock sale (capital gain) treatment as a complete termination of a shareholder's interest under Sec. A's basis in the stock is ,000, so he would recognize a

Since all of A's shares would be redeemed, and because he is unrelated to the remaining shareholders, the redemption would qualify for stock sale (capital gain) treatment as a complete termination of a shareholder's interest under Sec. A's basis in the stock is $59,000, so he would recognize a $1,000 long-term capital gain from the redemption.

A does not care which tract of land he receives in redemption of his stock because he plans to sell the land immediately.

The other shareholders feel that the tracts will appreciate at about the same rate, so they are willing to distribute any of the tracts. If J distributes Tract I or Tract 2 to A to redeem his stock, the corporation must recognize a $50,000 gain.

H cannot deduct a loss on a nonliquidating distribution of depreciated property.

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Since all of A's shares would be redeemed, and because he is unrelated to the remaining shareholders, the redemption would qualify for stock sale (capital gain) treatment as a complete termination of a shareholder's interest under Sec. A's basis in the stock is $59,000, so he would recognize a $1,000 long-term capital gain from the redemption.A does not care which tract of land he receives in redemption of his stock because he plans to sell the land immediately.The other shareholders feel that the tracts will appreciate at about the same rate, so they are willing to distribute any of the tracts. If J distributes Tract I or Tract 2 to A to redeem his stock, the corporation must recognize a $50,000 gain.H cannot deduct a loss on a nonliquidating distribution of depreciated property.

,000 long-term capital gain from the redemption.

A does not care which tract of land he receives in redemption of his stock because he plans to sell the land immediately.

The other shareholders feel that the tracts will appreciate at about the same rate, so they are willing to distribute any of the tracts. If J distributes Tract I or Tract 2 to A to redeem his stock, the corporation must recognize a ,000 gain.

H cannot deduct a loss on a nonliquidating distribution of depreciated property.

Conversely, if it distributes appreciated property it must recognize gain as if it had sold the property to the shareholder for its FMV. However, if the corporation distributes Tract 3, it will not recognize any gain.