ILLMAS Posted August 19, 2021 Report Share Posted August 19, 2021 Scenario: Business stopped operating in 2019 but didn't close until 2021 because they were waiting to collect some outstanding AR's. 12/31/20 BS Cash $20,000 Total Assets $20,000 Common Stock $500 Retained Earnings $19,500 Total Laib. & Equity $20,000 P&L Sales $18,000 Expenses $0 Profit $18,000 12/31/21 will have no activity Tax return is prepared on the cash basis and the business has a NOL of +30,000 so there is no tax due. To close out the bank account and distribute the funds, would it be safe to pay dividends of $19,500 to the owner and $500 of capital gains? Thanks Quote Link to comment Share on other sites More sharing options...
Lee B Posted August 19, 2021 Report Share Posted August 19, 2021 Your scenario implies your client is a cash basis C Corp, in which case the numbers don't don't make sense to me. 1 Quote Link to comment Share on other sites More sharing options...
DANRVAN Posted August 20, 2021 Report Share Posted August 20, 2021 18 hours ago, ILLMAS said: To close out the bank account and distribute the funds That would be a corporate liquidation where the shareholder exchanges his stock for remaining assets. So your client would have a capital gain equal to $20,000 less basis in stock per section 331(a). Technically, form 966 should be filed and 1099-div showing the $20,000 liquidating cash distribution in the specific box. Final paper work also needs to be filed with the state. 3 Quote Link to comment Share on other sites More sharing options...
Catherine Posted August 20, 2021 Report Share Posted August 20, 2021 4 hours ago, DANRVAN said: Final paper work also needs to be filed with the state. Yes; don't forget that! Plus there is usually a fee (sometimes hefty) for dissolution. 1 Quote Link to comment Share on other sites More sharing options...
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