Dissolving an S-Corp, if all that is left on S-Corp B/S is cash in bank, common stock and retained earnings, can we distribute the retained earning to the 2 shareholders tax free?

[sjrcpa]

You don't distribute retained earnings. You distribute the cash. It is tax free to the shareholders up to the amount of their basis in the S Corp stock.

[IRonMaN]

Plus, I think the shareholders would prefer getting the cash instead of a piece of paper saying "here is your distribution of retained earnings" 😉