Liquidating dividend tax dating since elementary school
The double taxation feature inherent in C corporations plays a special role in liquidation.The liquidation of a company means that the business operations have ceased and the assets and property owned by the corporation are redistributed.
Liquidation of the assets will result in a tax on the gains, similar to that observed in changing business structure.
While there are several reasons for doing this, one reason is to eliminate the double taxation feature of corporations.
As part of the conversion, the assets owned by the corporation must first be transferred to the shareholders in exchange for stock.
As part of every liquidation, state and federal income, payroll and capital gains taxes must be paid at both the corporate and individual levels.
A C corporation is a business entity governed by Subchapter C of the Internal Revenue Code.
Each of these actions produces potentially taxable events at the corporate and individual shareholder levels.