H c liquidating corporation

For a complete liquidation, Section 331 (a) (1) provides for exchange treatment, and Section 1101 (c) requires the recognition of gain or loss on the sale or exchange of property.

in addition, Form 1096 which notifies shareholders of their respective gains or losses must be sent to the IRS by February 28.A liquidation will occur even though the corporation retains a nominal amount of assets to pay any remaining debts and preserves its legal status. The business may have been unsuccessful, or the shareholders may decide to terminate the corporate existence and acquire the assets of the corporation.Generally speaking, a liquidation occurs when a person or a corporation wants to purchase the assets of the corporation.The purchaser may buy the stock of the shareholders and then liquidate the corporation to acquire the assets.Conversely, the purchaser may buy the assets directly from the corporation; thereafter, the corporation will distribute the sales proceeds to its shareholders.

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The different means used to liquidate a corporation will produce varying tax results.

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