Correct me please....C corp stuff

[schirallicpa]

I feel like I'm doing this wrong.  C corp.  1 shareholder.  Not my client - or I would have had him become an S corp years ago.

Sold assets and closing corp.  Tax preparer of past wants to distribute dividends.  I'm not sure.  I think this is liquidating distributions and dividends maybe should have been paid in the past.  But it's all done, and I have been asked to prepare final return.

TP gets:  Cash and Note totaling: 202278.

His stock and APIC total: 62600

Unappropriated RE totals: 101291

He has personal gain on 1040:  38387

??

Am I off the rails and clueless here?  Blind leading the blind?  Please be gentle with me....

[kathyc2]

Been a while since I've had a C, but I think he has taxable income of 139,678, which is the 202,278 received less basis of 62,600.

[schirallicpa]

Yeah - I think so.  Over the weekend I read that the retained earnings doesn't come into play. 

[DANRVAN]

On 12/1/2023 at 4:56 PM, kathyc2 said:

received less basis of 62,600.

That is correct, assuming he was the original sole owner of the stock and did not aquire through purchase, inheritance or gift.

 

1 hour ago, schirallicpa said:

retained earnings doesn't come into play. 

That is correct.  Since the C-corp is a separate taxable entity, retained earnings do not change basis and are subject to double taxation.

His basis equals his investment; internal transactions do not change it with a C corp.