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Thanks for your question, and thanks for using JustAnswer.com. The depreciable assets that are left over, are deemed sold.
At the end of the day, you want the balance sheet to be completely zeroed out in the final return.
The shareholder will recognize gain on the sale of the assets, which in turn raises their basis in the stock.
Simple example: assume shareholder contributes $1,000 to S corporation. Assume S corporation takes the $1,000 and buys a depreciable asset. In year 1, S corporation takes a $1,000 depreciation deduction which passes out to shareholder and reduces the shareholder's basis to zero. In year 2, S corporation liquidates and distributes the asset to the sahreholder. Assuming the asset has a $1,000 FMV, the distribution will be treated as a "deemed" sale of the asset for $1,000. The deemed sale will result in $1,000 gain (basis of asset is zero) and this gain will increase the shareholder's stock basis from zero to $1,000. The liquidating distribution is treated as payment of $1,000 in exchange for stock that has a basis of $1,000 (i.e., a "deemed" sale of the stock). So, in this simple example, the liquidation produced a $1,000 gain from the deemed sale of the asset and no gain or loss from the deemed sale of the stock. The shareholder's basis in the asset equals the $1,000 FMV and the shareholder has a tax liability on the $1,000 gain with no cash from the deemed sale to pay the tax
If the amount is small, then there's probably not much effect on the taxpayer. Just make sure you completely zero out the balance sheet in the final return.
The CPA marked the 2012 return as final, but there was still a small amount of cash and the assets I've already mentioned. $500 in capital stock and small R/E. In early 2013, we closed out the bank account and deposited the cash in the S/H's personal account. Should we file again in 2013 for another "final" return?
You're talking such small dollars I wouldn't mess with it.
If anything, you would amend the final return, not file a new one
Ok, that must have been what the CPA was thinking. More trouble than it was worth, so to speak.
Yes, you're talking very small dollars. Now, if it were several thousand dollars I would fix it