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Dear et00u1ly -
Currenly, the S corp is allowed to report the gain on the sale of assets on the installment basis. If distribute the note, the entire gain is taxable on the S corp books and distributible to you.
Using the installment sale provisions requires that payments be received in future years. As the seller will not receive any payments in future years, the entire gain will be reportable in the current year.
See page 11 of IRS Publication 537 (link below) "Disposition of an installment obligation"
Thus you will be paying tax without having the cash. The only income that will be reported on your individual return after the liquidation will be the interest income on the note.