"John" <John[at]john.com> wrote:
- quote -

Its in the Internal Revenue Code

- quote -

That is exactly what he said.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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- quote -

Well, thanks for the confirmation anyhow

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"John" <John[at]john.com> wrote:

- quote -

Thoughts are free; cites cost extra. Liquidation is whatever
causes the corporation to no longer have assets,however that
is accomplished (other than through its regular operations).

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Yes. If it's a "C" corporation, the tax is at regular rates
(i.e., no special rate for capital gains). That could be as
high as 35% plus state tax.

--
Tom Healy, CPA
Boulder, CO
Web: http://www.tomhealycpa.com

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"Katie" <katiej_1958[at]yahoo.com> wrote:
- quote -

Thanks, two follow up questions...
1) I thought liquidation was conversion to cash. You are
saying it is actually distribution of assets; is that
correct?
If so, can you cite a reference for that definition?
2) Do I understand you to say that the company can
distribute securities rather than selling them and
distributing the cash, but it must still pay the capital
gains. Is that correct? I just want to ascertain that it
can distribute securites, and doesn't have to sell them.

Your help is much appreciated.

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"John" <John[at]john.com> wrote:

- quote -

No. Property passes to you at its fair market value, and the
corporation is liable for tax on the gain. One reason
appreciating assets aren't good for corporations to own.

--
Tom Healy, CPA
Boulder, CO
Web: http://www.tomhealycpa.com

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"John" <John[at]john.com> wrote:

- quote -

No.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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John wrote:

- quote -

No. The corporation must recognize gain on the distribution
as if the securities had been sold at FMV. IRC Sec. 311(d).
The stockholders will have ordinary income (dividend) to
the extent of the corporation's earnings & profits, return
of capital to the extent if their basis in the corporation's
stock, and capital gain to the extent of any excess of the
FMV of the distributed assets over their basis.

P.S. Liquidation and dissolution are not the same thing. By
distributing the assets (either the stocks themselves or the
proceeds from their sale by the corporation), along with any
other net assets, the corporation would be liquidated. In
order to dissolve, it must take the steps required under the
laws of its state of incorporation to do so. It will then
cease to exist as an entity.

In some states, a corporation may be required to continue
filing returns and paying a minimum tax until it is
dissolved, even if it has liquidated. If the stockholders
have received value from the corporation that they did not
pay for (e.g., the appreciated securities or the proceeds
from their sale), they may be held personally liable for
such taxes as transferees of the corporation.

Katie in San Diego

The foregoing is intended for educational purposes only and
does not constitute legal or professional advice.

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A small closely held corporation has no assets other than
publicly traded stocks and treasury notes.

Can it avoid paying capital gains tax on them when
dissolving by distributing the securites rather than selling
them and distributing the proceeds?

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