Report cash liquidating distributions dating but no physical contact

The primary difference between C corporations and S corporations is that C corporations are taxed twice on earned income: : once at the corporate level when the income is earned, and again at the shareholder level when the income is distributed.The rules governing distributions from C corporations differ from the rules that apply to distributions from S corporations.To the extent that a distribution is made from the corporation’s earnings and profits, it is taxed to the shareholder as a dividend.[1] The portion of the distribution that is not considered a dividend is applied first to reduce the shareholder’s basis in the corporation’s stock.[2] Any remaining portion is treated as gain from the sale or exchange of property (capital gain).[3] Important Note: If a shareholder assumes a liability or takes property subject to a liability, the amount of the distribution is reduced by the amount of the liability.[4] Special rules also apply at the corporate level.[5] Special rules apply to distributions to a shareholder in exchange for the shareholder’s stock (redemptions).

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But that section only covers gain on distributions of appreciated property.

If the corporation distributes property that has depreciated (i.e., property with a built-in loss), Code § 311(b) does not apply.

If a person's holding period exceeds one year, the IRS views his capital gain or loss as long-term.

If a taxpayer purchased stock in a corporation in several separate transactions and the corporation decides to completely liquidate its assets, the IRS requires the stockholder to spread any cash liquidation distributions over each of the different blocks of shares he owns.

A person's holding period begins the day after he acquires stock in a corporation and ends the day after he receives payment, or a final liquidation distribution, for the stock.

If a taxpayer holds a stock for one year or less, the IRS considers his capital gain or loss as short-term.

A corporation will not recognize any gain or loss on a distribution of cash to its shareholders.[13] But if the corporation distributes appreciated property, the corporation must recognize gain as if the property were sold to the shareholder at fair market value.[14] Important Note: These two rules operate as a loss disallowance system.

If the corporation distributes appreciated property, the corporation is taxed on the gain under Code § 311(b).

In general, a stockholder's basis equals the amount he pays to acquire stock in a corporation, including commissions and related fees.

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