[busiest]

Hi Everyone,

I’m a little unclear on basis/gain/loss for S Corp Liquidations.

I made the below question up:

ABC is liquidating (X is sole shareholder). X’s beginning basis in ABC is 15,000. ABC has the following assets:

Land – 10,000 FMV 5,000 Basis
Equipment – 7,000 FMV 2,000 Basis
Property – 3,000 FMV 8,000 Basis

What is X’s Gain/Loss and Basis related to each asset after the liquidating distribution?

Thanks!

[busiest]

Also – How would this change if they owned 70%?

[murano]

The total gain of the corp is 5000+5000-5000=5000
Since X's basis is 15000, assuming there are no other transactions, X's basis right before the distribution is 15000+5000=20000
X's gain on the distribution is 20000(fmv property)-20000(basis)=0
X's basis of the property is property's FMV
Land – 10,000
Equipment – 7,000
Property – 3,000

If X owns 70% instead of 100%,
X's basis right before the distribution is 15000+3500=18500
X's loss on the distribution is 20000*0.7(fmv property)-18500(basis)=4500
X's basis of the property is FMV of what ever he receives.

[Author]

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