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Partnership Taxation: Partnership Distributions - Lesson 1
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As a result, all the distributions necessary to effect a complete liquidation of a corporation do not have to take place on the same date or even in the same year. It is clear that taxpayers effecting the liquidation, deregistration or winding-up of a company must carefully consider the structure and form of the transactions under consideration, to prevent the creation of unintended taxable capital gains. If the IRS assesses an additional tax liability after the assets have been divided among the shareholders, disagreements could arise regarding who is responsible for the deficiency. Note also that Rev. Finally, it may be desirable to avoid a lengthy liquidation period to minimize exposure to double taxation and to avoid Sec. After the basis of your stock has been reduced to zero, you must report the liquidating distribution as a capital gain. The shareholder should expect the liquidation distribution to be entirely tax-free. Generally, a loss cannot be recognized until the tax year in which the final distribution is received. However, there have been some exceptions to this rule e. If it was a partial liquidation, there is nothing to report on your tax return.
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