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PDtax
PDtax, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 4181
Experience:  35 years tax experience, including four years at a Big 4 firm.
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We are planning a business auction, C corporation, how will

Customer Question

We are planning a business auction, C corporation, how will the proceeds be taxed.
We have had the company 3 years.
Submitted: 1 year ago.
Category: Tax
Expert:  PDtax replied 1 year ago.
Hi from just answer. I'mCustomer and can assist. If you are having a liquidation auction, each asset type will be taxed based on its type. Inventory sold is treated as a sale of inventory. Sale of depreciable assets will be treated as 1245 or 1250 asset sales.
Expert:  PDtax replied 1 year ago.
The cash proceeds can then be used to pay final corporate expenses. Any remainder distributed to shareholders will be treated as payment in exchange of their shares, and each shareholder will recognize gain or loss on that exchange as a sale of their shares.
Expert:  PDtax replied 1 year ago.
Thanks for asking at Just Answer. Positive feedback is appreciated. I'mCustomer
Customer: replied 1 year ago.
what is 1245 or 1250? How is loss from prior year handled?
Expert:  PDtax replied 1 year ago.
1245 or 1250 are the tax cods sections governing the sale of depreciable property. Things like office equipment or vehicles are 1245 property. Sale of real property are governed by 1250.
The code sections cover things like depreciation recapture.
Prior year losses are not usable when the c corporation is liquidated.
Thanks again. Don't forget to rate my assistance with positive feedback.
Customer
Customer: replied 1 year ago.
Depreciation recapture? what does this mean, most of our equipment is depreciated out.
Customer: replied 1 year ago.
Would we pay taxes on the sale amount of the equipment ?
Expert:  PDtax replied 1 year ago.
1245 depreciation recapture means that you will likely have tax gains on some of the sales. You might still have tax losses for your final 1120.
1245 depreciation example: office furniture you paid $1,800 for has $1,720 in depreciation including the half year in the year of disposal. Let's say you sell it for $300. You will have $220 in depreciation recapture income, and $300 in cash.
I suspect that you have other losses, and a prior year net operating loss that might make for a final year tax loss. So, it's likely no taxes will be due, but I don't know enough to say with what you have provided.