Topic 10 Liquidations

Question 1

Tax Consequences

• corporate acquires ___ stock from ___ shareholders in exchange for “___” of its net assets
• corporation ______ to do business
• file form ___ to inform IRS of intent to liquidate within __ days after owners resolve to liquidate

Answer 1

all; all; all

ceases

966; 30

Question 2

Liquidation

• fully _______ to non corporate shareholders
• –treat property received as “___ ______” in exchange for stock
• –gain/loss = difference between ____ ______ and ___ __ ______ ____:
• —–debt assumed by shareholder reduces ___ of property received
• —–FMV cannot be less than the ___ assumed by shareholder
• –tax basis equal property’s ___

-if corporate shareholder own __% or more of stock - no gain/loss recognized and ________ tax basis

Answer 2

taxable

full payment

stock basis; FMV of property received

FMV

debt

FMV

80%; carryover

Question 3

Taxable Liquidating Distributions

-Liquidating corp recognizes ___ gains and _______ losses on taxable distribution of property

• does not recognize loss if:
• –distributed to a ______ party
• –distribution in ___-___ ____
• –asset distributed is _________ property:
• —–acquired within _ years of date of distribution in tax deferred §351 transaction or as nontaxable contribution of capital
• –property distributed was acquired in §___ transaction or as __________ of _______, and the principal purpose was to recognize a loss by liquidating corporation
• —–prevents ____-__ loss at time of distribution from being recognized by treating basis at the FMV at time of contribution

Answer 3

all; certain

related
non-pro rata
disqualified
5
§351; contribution of capital
built-in

Question 4

Nontaxable Liquidating Distributions

• liquidating corporation (does/does not) recognize gain/loss on tax-free distributions of property to an __% corporate shareholder (parent/sub)
• liquidation expenses are deductible on final Form ____
• deferred or capitalized expenditures are deductible on _____ tax return

Answer 4

does not; 80%

1120

final