Ch. 6 Flashcards

Front 1

Complete Liquidation

Back 1

Distributions made by a liquidating corporation that must be either
1. Completely cancel or redeem all its stock in accordance with a plan of liquidation
2. Or be one of a series of distributions that completely cancels or redeems all its stock in accordance with a plan of liquidation

Front 2

Tax Consequences of distributions made before corporations adopt a plan

Back 2

Taxed to the shareholders as a dividend distribution or stock redemption

Front 3

When does liquidation status exist?

Back 3

Corporation ceases to be a going concern and its activities are for the purpose of winding up affairs, paying its debts, and distribution of remaining property to shareholders

Front 4

When is a liquidation completed?

Back 4

Liquidated corporation has divested itself of substantially all property

Front 5

Dissolution

Back 5

Corporation has surrendered the charter it received from the state

Front 6

Amount of recognized gain or loss of liquidation to shareholders

Back 6

Equals the difference between the amount realized (FMV of assets plus money) and basis in the stock. Liabilites reduce amount realized

Front 7

Can a liquidating company recognize loss?

Back 7

Yes when it distributes property that has decline in value

Front 8

Character of the recognized gain or loss in a Liquidation

Back 8

Recognized as a capital gain or loss unless
1. Loss recognized on individual shareholder Sec. 1244 then its Ordinary Loss
2. Loss recognized by a corporate shareholder on the worthlessness of controlled sub is Ordinary Loss

Front 9

What is the shareholder left with when liquidation is complete and taxes paid?

Back 9

?

Front 10

FMV of distributed property

Back 10

Cannot be less than the amount of liability assumed or acquired

Front 11

Loss Recognition in connection with property distributions

Back 11

Cannot recognize loss in connection with distributions to related person if
1. Distribution of loss property is other than pro rata
2. Distributed property is disqualified property

Front 12

Related Person

Back 12

An individual or corporation whose stock is more than 50% owned by such individual, as well two corporations that are members of same controlled group

Front 13

Loss recognition in respect to Sale, Exchange or Distribution of Property

Back 13

Cannot recognize loss of property acquired in Sec. 351 transcation or as a contribution to capital, where liquidating corporation acquired the property as part of a plan having the principal purpose of loss recognition by the corporation

Front 14

When does a parent corporation recognize no gain or loss in a liquidation of controlled sub?

Back 14

Controlled sub corporation liquidates into its parent corporation

Front 15

Requirements for a liquidation to qualify for nonrecognition

Back 15

1. Parent corporation must own atleast 80% of of the total combined voting power of all stock and 80% of the total value of all classes of stock
2. Property distribution must be in complete cancellation or redemption of all subs stock
3. Distribution of the property must occur within a single tax year or be one of a series of distributions completed within three years of the close of tax year

Front 16

Basis of Property Received From Sub to Parent

Back 16

Parent corp basis for property received in liquidation distribution is same as sub corporations basis

Front 17

Tax Attribute Carryovers From Sub to Parent

Back 17

1. NOL carryovers
2. Earnings and profits
3. Capital Loss Carryovers
4. General business and other tax credit carryovers

Front 18

Partially Liquidating Distributions

Back 18

IRS permits shareholders basis to be recovered and first then recognition of gain once shareholder recovers basis of share or block of stock

Front 19

Installment Obligations Received by a Shareholder

Back 19

Report the FMV of their obligation as party of the consideration received to calculate recognized loss/gain

Front 20

Expenses of Liquidation

Back 20

Corporation can deduct expenses including
1. attorney's,
2. accountants fees,
3. costs in drafting liquidation plan and obtain shareholder approval