Business Liquidation (BUSL)

Pre-requistes:

Knowledge Level:

Major Topics:

• Key planning issues and benefits in liquidating partnerships and limited liability companies
• The unique planning opportunities and tax traps involved in the liquidation of a business entity
• Understanding installment sales and the big hurdles to favorable tax treatment in liquidation
• Filing Form 966: it’s more important than you think
• An analysis of when liquidation is advisable – now or later?
• Strategies to pursue in light of the tax rates on dividends and capital gains
• The special problems of liquidating Subchapter S corporations

Learning Objectives:

• Define a complete liquidation of a C corporation;

• Describe the tax consequences of a complete liquidation to a shareholder;

• Distinguish the tax consequences of a corporate loan to a shareholder from a shareholder loan to the corporation when the corporation completely liquidates;

• Explain how the discharge of indebtedness on liquidation affects the corporate debtor;

• Identify a plan of complete liquidation;

• Discuss how an installment sale of assets in connection with a complete liquidation is taxed;

• Analyze different techniques to avoid or defer gain on a complete liquidation; and

• Describe how a partial liquidation may be used as an alternative to a complete liquidation and its tax consequences to the corporation and the shareholders.

• Explain the circumstances when the redemption of S corporation stock is treated as a sale and the tax consequences of such treatment;

• Describe how income and loss is allocated to the shareholders in the year a shareholder’s stock is redeemed;

• Discuss how the redemption of S stock affects the income or loss, the accumulated adjustment account, and the C earnings and profits of the S corporation;

• Explain the tax consequences of a complete liquidation of an S corporation on the corporation and its shareholders;

• Discuss the use of an installment sale of assets in connection with the complete liquidation of an S corporation;

• Define a qualifying installment sale; and

• Identify the factors that must be considered in determining whether an S corporation should continue in existence or liquidate following the sale of its assets.

• Describe the general tax consequences to a partner on receiving a liquidating distribution with respect to the distribution, the timing, and amount of partnership income or loss in the year of the liquidation;

• Distinguish a §736(a) payment from a §736(b) payment;

• Identify hot assets and describe how they influence the taxation of a liquidating distribution;

• Discuss the tax consequences when a partnership debt is distributed to debtor-partners and the effects of a discharge of partnership indebtedness implicated on the liquidation of a partnership interest;

• Explain the special problems associated with distributions of property subject to depreciation recapture and of property that is an installment-sale obligation;

• Identify two different partnership tax terminations; and

• Discuss the tax effects of a partnership termination on capital accounts, contributed property, distributed property, noncontributing partners, distributions to contributing partners, the optional basis adjustment available, and the partnership’s taxable year.

• List the requirements to qualify a subsidiary liquidation under §332 and §337;

• Explain the tax consequences to a parent corporation and to the liquidating subsidiary;

• Describe the issues with respect to the debt of a parent to a subsidiary and the debt of a subsidiary to a parent in a complete liquidation;

• Discuss the computation of basis of assets distributed in a subsidiary liquidation including one that was preceded by a §338 election;

• Explain the carryover or adjustment of tax attributes in a complete liquidation of a subsidiary into a parent corporation;

• Describe the tax problems when the liquidating subsidiary is a member of a consolidated group that includes the parent;

• Define excess loss accounts and their relationship to basis; and

• Discuss the tax consequences of a disposition of subsidiary stock, distributions made by the subsidiary to a parent, and intercompany transactions.

Designed For: