H c liquidating corporation in
Therefore, you must determine how much your corporation owes to each creditor.
Before your corporation can truly cease to exist, it must wind up its business affairs.
While “complete liquidation” is not defined by the Internal Revenue Code, IRS regulations suggest that your corporation enters liquidation status when it ceases to be a going concern and, instead, corporate activities are mainly for the purpose of closing down the business, paying corporate debts and distributing remaining assets to the shareholders.
But you also get the higher $5,000 tax basis in the vehicle, which may give you a larger capital loss if you sell it.
For the purpose of calculating the resulting gain or loss from the deemed stock sale, your tax basis in the shares exchanged for the liquidating distribution is your original cost or investment.
In this situation, you calculate your gain or loss using $25,000 as the gross proceeds -- the cash plus the car's value minus the outstanding debt on the car.