Tax consequences of liquidating Chat cam2cam new 2014
To be taxed as a liquidating distribution, however, a partner's interest in the partnership must terminate.
Only partners who receive a liquidating distribution of cash may have an immediate taxable gain or loss to report.
In its ruling, the IRS stated that the distribution would have been made, in the same amounts, whether or not the partnership had converted into a corporation.
The Snag After the conversion, the corporation found that it could not raise the desired capital at an acceptable cost as long as its operations included a particular business unit.
If you were to sell the stock, you would owe capital-gains tax if the proceeds from the sale, plus the amount of any liquidating distributions you previously received, exceeded your original cost basis in the stock.
If the sales proceeds plus liquidations amounted to less than what you paid, you would report a capital loss.
Instead, gain or loss is delayed until you sell the property.
For example, if you paid ,000 for your stock in the company, and that was your current cost basis, the ,000 distribution would reduce the basis to ,000.
If you received further liquidating distributions totaling more than ,000, your cost basis in the stock would fall to zero, and you usually would have to pay capital-gains tax on the excess amount, even if you continued to own the stock.
The value of marketable securities, such as stock investments that are traded on a public stock exchange, and decreases to your share of the partnership's debt are both treated as cash distributions.
When the total amount of cash distributed is more than a partner's basis in her partnership interest, the difference in the two amounts is a gain.