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How to Liquidate
First, how to get there; then a little info below on why Box 8 and 9 is usually not taxable. Then, the shareholders are treated as exchanging their stock for the FMV of the assets distributed in complete liquidation, with the resulting gains or losses at the shareholder level. However, there have been some exceptions to this rule e. They may be paid in one or more installments. The shareholder does not recognize and report additional income as it collects the receivable because the shareholder has already included this amount in its gain or loss computation when it received the liquidating distribution. If you acquired stock in the same corporation in more than one transaction, you own more than one block of stock in the corporation. 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. You may not need to report this income, however fill in the DIV as written on the form. If you receive distributions from the corporation in complete liquidation, you must divide the distribution among the blocks of stock you own in the following proportion: Any taxable amount the investor receives is reported on Schedule D , the capital gains and losses statement that is filed with the IRS form during yearly tax filings. Divide distributions in partial liquidation among that part of the stock that is redeemed in the partial liquidation. But if the amount of the receivable that the shareholder ultimately collects differs from the amount that the corporation distributed, the shareholder recognizes gain or loss for the differences in the amounts reported and collected. Look for ways to eliminate uncertainty by anticipating people's concerns. Danylak, Kimberly Drechsel, James A. Related Links. Guidance on the tax treatment of these items in and subsequent tax years is uncertain, so practitioners should watch for future legislation. Whether you report the loss as a long-term or short-term capital loss depends on how long you held the stock.
Video about reporting liquidating distributions:
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