C corporation liquidating dividend

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The XYZ Inc has only 7K in cash and it needs to come up with additional 5K.

The XYZ Inc offers the departing shareholder NJ peace of land to cover the 5K shortfalls. The shareholder accepts the offer and receives 4K in cash and NJ land.

The borrower has a reasonable prospect of being able to repay the loan. The parties conduct themselves as if the transaction is a loan (for example, by shareholders showing loans they purportedly owe to their corporations as liabilities on personal balance sheets).

After the distributing corporation's E&P is exhausted, subsequent distributions reduce each shareholder's basis in his or her stock.

Although a corporation is allowed to recognize tax losses when depreciated property is distributed to shareholders in complete liquidation of the corporation (Sec. At the shareholder level the stock redemption or non-cash distribution can result in a variety of tax consequences: taxable dividends or capital gain taxes. Lets say XYZ Inc (S Corp) has three unrelated shareholders. One in NJ with adjusted cost basis of 5K and one in NY with adjusted cost basis of 7K.

Each shareholder owns 100 shares of XYZ Inc stock @ 0 per share. After 5 years, one of the shareholders wants to leave the corporation and requests the corporation to buy back his 100 shares for 12K.

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88–272 inserted “(other than a distribution referred to in paragraph (2)(B) of section 316(b))”. 90, provided that in the case of corporations referred to in former subsec.Section 301 (relating to effects on shareholder of distributions of property) shall not apply to any distribution of property (other than a distribution referred to in paragraph (2)(B) of section 316(b)) in complete liquidation. 97–248, § 222(a), substituted provisions that amounts received by a shareholder in a distribution in complete liquidation of a corporation shall be treated as in full payment in exchange for the stock for provisions that, in complete liquidations, amounts distributed shall be treated as in full payment in exchange for the stock, while amounts distributed in partial liquidation shall be treated as in part or full payment in exchange for the stock. In the case of any liquidation to which section 332 applies, no loss shall be recognized to the liquidating corporation on any distribution in such liquidation. in the case of stock or voting trust certificates acquired from an employee or retiree of such corporation, the spouse, child, or estate of such employee or retiree or a trust created by such employee or retiree which is described in section 1361(c)(2) of the Internal Revenue Code of 1986 (or treated as described in such section by reason of section 1361(d) of such Code), and Written determinations for this section These documents, sometimes referred to as "Private Letter Rulings", are taken from the IRS Written Determinations page; the IRS also publishes a fuller explanation of what they are and what they mean. It appears that the IRS updates their listing every Friday.The preceding sentence shall apply to any distribution to the 80-percent distributee only if subsection (a) or (b)(1) of section 337 applies to such distribution. Note that the IRS often titles documents in a very plain-vanilla, duplicative way.

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