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Answered in 20 minutes by:
12/10/2013
Stephen G., Sr Financial Expert
Category: Finance
Satisfied Customers: 10,959
Experience: Extensive Experience with Tax, Financial & Estate Issues
VerifiedWell, you don't have that much cash in the Corp., so the there's no problem with taking the cash out, just leaving enough to pay any final year fees that may be due to the state or make any payroll deposits, etc., if any.
I'd close the shareholder loan account (liability) to your capital account by debiting the shareholder loan & crediting the capital paid-in-account.
Then you would close out the rest of the accounts and any net liability or asset would flow to you as a liquidating distribution. You would have to compare that distribution to the basis of your capital stock which should basically be very close to the distribution if you have claimed the losses on your tax return as you went along.
That would have reduced your tax basis in the debt so that when the adjusted paid in capital account was closed out against the retained earnings, there should be a minimal effect on your capital gain or loss on the liquidation of the S-Corp. That would be reflected on Schedule D as a liquidating distribution; a 1099 should be issued to report that transaction.
I'd close the shareholder loan account (liability) to your capital account by debiting the shareholder loan & crediting the capital paid-in-account.
Then you would close out the rest of the accounts and any net liability or asset would flow to you as a liquidating distribution. You would have to compare that distribution to the basis of your capital stock which should basically be very close to the distribution if you have claimed the losses on your tax return as you went along.
That would have reduced your tax basis in the debt so that when the adjusted paid in capital account was closed out against the retained earnings, there should be a minimal effect on your capital gain or loss on the liquidation of the S-Corp. That would be reflected on Schedule D as a liquidating distribution; a 1099 should be issued to report that transaction.
It really isn't that difficult. After you do your regular closing for the year, you'll be left with a balance sheet that balances. All you need to do is distribute the remaining assets & liabilities to the sole shareholder and debit & credit the asset, liability, & capital accounts with the offset being the new cash and other property liquidation distribution accounts. The remaining balances in those accounts would be the numbers that get reported on the 1099-DIV, boxes 8 & 9.
The only exception will be that portion of the debt that is due to the Family Limited Partnership. On the S-Corp, that balance will be debited to zero it out & that liability will be assumed by the shareholder & adjust the distribution balance.
The FLP will have a loss resulting from the non-payment of the liability. You will have to determine the nature of the loss and since the the FLP is also a pass through entity, the shareholder may have an offsetting gain/loss between the loss from the FLP & the gain from the liquidation's reduction of the liquidating distribution.
It's hard to know exactly without knowing the shareholder's tax basis in the S-Corp. stock and actual shareholder debt.
If you want to contact me again with any tax or financial questions, you can just ask for "Steve G" at the beginning of your question. Thanks again for using us for your tax and financial questions. You may get a short survey from the site; if it isn't too much trouble I would appreciate it if you would answer it; the survey results are used by the site as an additional tool to rate our performance;
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The only exception will be that portion of the debt that is due to the Family Limited Partnership. On the S-Corp, that balance will be debited to zero it out & that liability will be assumed by the shareholder & adjust the distribution balance.
The FLP will have a loss resulting from the non-payment of the liability. You will have to determine the nature of the loss and since the the FLP is also a pass through entity, the shareholder may have an offsetting gain/loss between the loss from the FLP & the gain from the liquidation's reduction of the liquidating distribution.
It's hard to know exactly without knowing the shareholder's tax basis in the S-Corp. stock and actual shareholder debt.
If you want to contact me again with any tax or financial questions, you can just ask for "Steve G" at the beginning of your question. Thanks again for using us for your tax and financial questions. You may get a short survey from the site; if it isn't too much trouble I would appreciate it if you would answer it; the survey results are used by the site as an additional tool to rate our performance;
Please remember to rate my response; it is the only way we get credit for our work.
Stephen G., Sr Financial Expert
Category: Finance
Satisfied Customers: 10,959
Experience: Extensive Experience with Tax, Financial & Estate Issues
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