Liquidating a loss corporation white dating

A shareholder’s basis in his S corporation stock is increased by the share of the S corporation income that is passed through to the shareholder.

Instead of being treated as dividends, redemptions are treated as a sale or exchange of the stock by the shareholder.[6] The distinction can be important when the long-term capital gains rates (which apply to redemptions) are higher than the tax rates on dividends.In the ruling, a corporate taxpayer had been incorporated in a state on a particular date, let’s say January 19, 2007.The company was “administratively dissolved” some time after, for example, effective January 25, 2008, due to its failure to timely pay state franchise taxes.While there are some differences, the S corporation basis system is similar to the rules that apply to partnerships.The tax consequences of distributions by an S corporation to a shareholder depend on the shareholder’s basis in the S corporation stock.

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