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Liquidation of S Corporations: Mastering Tax Implications of Liquidating Distributions

Case Study on Planning, Calculations, and Property Dispositions

Note: CLE credit is not offered on this program

A live 110-minute CPE webinar with interactive Q&A

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Thursday, December 5, 2024

1:00pm-2:50pm EST, 10:00am-11:50am PST

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This course will delve into a case study on the planning, tax calculations, property dispositions, and dissolution filings required to liquidate an S corporation. The panel will brief participants on the general rules stated in IRC Section 1371, tying liquidation rules back to those applying to C corps, and detailing the gain/loss on distributions in exchange for stock, as well as outline two or three scenarios illustrating the rules in action.

Description

S corporation liquidations generally are subject to the same rules as C corporations. However, the lack of entity-level tax in most cases creates different tax considerations. In some cases, there may be some corporate-level problems, such as the built-in gains taxes. Tax advisers must be aware of the Subchapter C rules, especially those concerned with gain or loss recognition on the distribution.

Also, Subchapter S contains the rules concerning the pass-through character of income, gain, and loss. Consequently, tax professionals advising the corporation and its shareholders must be able to calculate the tax impact for shareholders, who ultimately bear the tax burden of the liquidation.

Crucial to tax-efficient planning in S corp liquidation situations is the accurate calculation of S shareholders' outside tax basis in their shares and the S corp's inside tax basis in its assets. Advisers must have a comprehensive basis schedule for all shareholders. Other special rules concern the distribution of installment receivables and debt instruments held by shareholders.

Finally, there are some special considerations for unsuccessful corporations. Because a complete liquidation will cause any shareholder's suspended losses to be extinguished, the timing of the liquidation is a significant issue in planning.

Listen as our experienced panel provides a detailed examination of the tax rules and planning considerations to address in the dissolution and liquidation of S corporations and offers case studies to illustrate tax treatments to shareholders under various liquidation scenarios.

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Outline

  1. Rules for sale or other distribution of assets in connection with the liquidation of an S corporation
  2. Tax issues regarding character and timing arising from common transactions in a dissolution or liquidation
  3. Post-tax reform considerations
  4. A case study illustrating liquidation of S corp

Benefits

The panel will discuss these and other key issues:

  • What are the rules for recognizing income and losses in the year of liquidation of the S corporation?
  • How does the S corporation report liquidating installment receivables and other property distributions?
  • How do the S corporation and the shareholders report distributions of encumbered property, including situations where the debt exceeds the value of the asset distributed?
  • What are the ramifications to shareholders after liquidation regarding basis, payment of claims against the corporation, and transferee liability?

Faculty

Jamison, Robert
Professor Robert W. Jamison, CPA
Professor Emeritus of Accounting
Indiana University

Mr. Jamison is Professor Emeritus of Accounting at Indiana University, Purdue University, Indianapolis (IUPUI). His...  |  Read More

Wilson, Amanda
Amanda Wilson
Partner
Nelson Mullins

Ms. Wilson concentrates her practice on federal tax planning and structuring and represents clients in a wide variety...  |  Read More

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