MGMT 127B Chapter Notes - Chapter 6: Liquidating Distribution, Section 301 Of The Trade Act Of 1974
Document Summary
Corporate liquidation is when a corporation ceases to be a going concern. Corporations can liquidate for different reasons: the corporation has been unsuccessful, the shareholders want to acquire the corporation"s assets, another person wants to purchase the corporation"s assets. Recall that a non-liquidating property distribution of noncash property produces a gain (but not a loss) to the distributing corp. For the shareholder, the receipt of cash or other property produces dividend income to the extent of the corporation"s e&p. Example: a corporation with e&p of 40k makes a distribution of 50k to a shareholder who has a. If it is not a liquidation, the shareholder recognizes dividend income of 40k and a reduction of basis of 10k. If the distribution is a liquidation, the shareholder has a capital gain of 30k (50k - 20k) A corp distributes land with basis 200k and fmv of 300k and no liability: the corp has a gain of 100k on the distribution.
