Discussion Archives:Corporate Dissolution

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Discussion Forum Index --> Advanced Tax Questions --> Corporate Dissolution


Discussion Forum Index --> Tax Questions --> Corporate Dissolution

HLCPA (talk|edits) said:

31 December 2008
1 - C corp closes down. There is lets say $30 loan to officer, $45 loan

officer is taking over, $10 stock and RE $(85). Does the corp pick up the $75 as income in the final year? or does it convert to stock? In the current situation, its a medical corp, owned by one person. Has $30 currentyear income, NOL of $90, so if loan becomes income will have net taxable income 30+75-90=15. On the individual side he has stock of $10 and $30 loan not getting paid on and 45 of loan taking over. How is this treated on indiv. side? What is the capital loss?

2 - If this were an S-corp where the losses had flown thru to the owner, so that negative retained earnings equals loan from officer, how would be treated?

Thanks.

Riley2 (talk|edits) said:

2 January 2009
Let me see if I can summarize the balance sheet. Assets of $30,000, liabilities of $45,000 and stockholder's equity of minus $75,000. Shareholder's basis in his stock is $10,000.

Debt cancellation income of $45,000 would be nontaxable under the insolvency or contribution to capital exception.

Shareholder would recognize a $25,000 capital loss when he pays off the $45,000 liability.

HLCPA (talk|edits) said:

5 January 2009
Thanks, but the assets are Zero, the 30,000 is corp owing to SH. (0-30-45-10+85=0)

So I think you would be saying that the full $75,000 would not be taxable for the corporation and the SH would be able to claim an $85,000 capital loss? ( 30 + 45 +10 = 85) NOL would not be used in this case, and not be an issue for CA purposes, with suspended NOL in 2008. Thanks, I appreciate your input greatly.

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