In the ruling, a corporate taxpayer had been incorporated in a state on a particular date, let’s say January 19, 2007.
The company was “administratively dissolved” some time after, for example, effective January 25, 2008, due to its failure to timely pay state franchise taxes.
If the shareholder assumes known corporate liabilities or receives corporate property subject to a liability (such as the distribution of mortgaged land), the amount realized is reduced by the amount of the liability (Ford, 311 F2d 951 (Ct. It appears that the adjusted basis of stock held in a liquidating corporation is adjusted for current-year passthrough items prior to determination of gain or loss from the receipt of the liquidating distributions (see Regs. The 2007 distribution is allocated the same as before.
The last substantial distribution can be used only if, at that time, the amount of the final distribution is both de minimis and determinable with “reasonable certainty.” (See in this regard Rev. Footnotes *Except in instances where the liquidation is governed by Section 332(a), and Section 337(a). Distributions in complete liquidation of an S corporation are treated as payments in exchange for the shareholder’s surrendered stock (Sec. In addition, during the liquidation of an S corporation, it may be difficult to predict the ending balance of AAA.This may in turn make it difficult to accurately determine the AAA available for ordinary distributions and makes inadvertent dividend distributions from AE&P more likely to occur.(See Bittker and Eustice, Federal Income Taxation of Corporations and Shareholders at Para. he shareholder consequences of a complete liquidation of an S corporation are governed by Secs. The dividend rules that otherwise apply to corporate distributions are not applicable to distributions in complete liquidation.Company management, however, was blissfully unaware of this development and continued to file the business’s federal corporate income tax return and pay all federal income taxes.