Liquidating distribution taxability Online sex mobi chat
By far the largest element of value in a profitable professional practice is the intangible .
There’s little doubt that distributions of the tangible property to shareholders in a liquidation are taxable under section 336.
The corporation recognizes income on the excess of fair market value over adjusted basis.
The shareholders recognize capital gains on the fair market value of the property received in excess of their basis in the stock.
However, in case all debts to creditors have been fully satisfied, there is a surplus left to divide among equity-holders.
In planning for a liquidation of their professional practice or advising clients about the liquidation of a commercial organization, CPAs will find that the problems and the solutions are likely to be the same.
In a firm or corporate liquidation, or when a shareholder redeems his or her interest, it’s not uncommon for the business to distribute property as well as money in exchange for the capital stock a shareholder held.
But a question arises when it distributes to its shareholders all its assets—both tangible and intangible—and ceases doing business: Is there a taxable distribution of its intangible goodwill? According to the Tax Court, on the other hand, the answer is that it depends.
The question of who “owns” the client relationships and customer-based intangibles turns on whether an employment or noncompete agreement is in effect at the time of the distribution.