For liquidating

28 Sep

331, a liquidating distribution is considered to be full payment in exchange for the shareholder’s stock, rather than a dividend distribution, to the extent of the corporation’s earnings and profits (E&P).

The shareholders generally recognize gain (or loss) in an amount equal to the difference between the fair market value (FMV) of the assets received (whether they are cash, other property, or both) and the adjusted basis of the stock surrendered.

If the corporation distributes its assets for later sale by the shareholders, the assets generally “come out” of the corporation with a basis equal to FMV (and with the related recognition of gain or loss under Sec.If the decedent specifically bequeaths or devises an asset, or leaves a piece of real estate by will, the executor or administrator can’t sell it unless it’s necessary to pay the decedent’s debts or estate expenses.There are several possible reasons for liquidating assets before distribution of the estate residue (what’s left over after paying all debts, expenses, taxes, and specific bequests and devises) including: Most stocks, bonds, and other securities are held in brokerage accounts.When an entity chooses or is forced by a legal judgment or contract to turn assets into a "liquid" form (cash). An individual may choose to liquidate his or her possessions or investments to pay off creditors, convert assets to cash for spending or because the investments are not going to increase in value and the investor wants to re-allocate funds.2.Businesses are best known to liquidate assets as a part of bankruptcy procedure, but the process can also be used by businesses to free up cash, even in the absence of financial hardship.