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S Corp dissolution

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Level 2

Sole shareholder S Corp is dissolved with negative AAA, about $5k in cash and about $2k in net fixed assets.  Shareholder has zero stock basis and about $9k in debt basis.  How should distribution of cash and fixed assets be reflected in 1120 S and what should flow through to the personal return?

Thanks in advance.

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3 Replies 3
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Level 15

The fixed assets should be reported as a sale with the sales price equal to the estimated market value of the assets.  Sounds like the cash didn't get distributed but did pay back some of the outstanding debt.

ex-AllStar, ex-Lutefisk taste taster, ex-ACME product tester
and ex marks the spot where those rocks and anvils hit me.
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Level 2

Thanks for the quick response.  So the distribution of fixed assets to the sole shareholder is pretty much a non-taxable event because the FMV is equal to or less than the remaining basis?  And should the $5k of cash be recorded as distribution to sole shareholder with part of it being subject to tax by shareholder since most of the outstanding loan was already used to absorb prior year operating losses?

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Level 15

The vehicle should be pretty much a none event then.  I think you still want to apply the cash to the loan.

ex-AllStar, ex-Lutefisk taste taster, ex-ACME product tester
and ex marks the spot where those rocks and anvils hit me.
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