Shutting Down a C Corporation

Written by Coach Janelle CPA on July 13, 2023

There are several tax implications that you need to be aware of when shutting down a C corporation.

Complete liquidation of a C corporation is when it ceases to be a going concern, winds up its affairs, pays its debts, and distributes its remaining assets to the shareholder(s). In tax terms, the corporation redeems all its stock, and during the redemption, there can be one or more distributions pursuant to a plan.

While not mandatory, having a written plan is advisable because it establishes a specific start date for the liquidation process. This helps differentiate between regular dividends and liquidating distributions.

There are three ways your corporation can achieve liquidation:

1. Distribute all of the corporation’s assets to the shareholder(s).

2. Sell all its assets, and distribute the proceeds.

3. Sell some assets, and distribute the resulting sales proceeds and unsold assets.

The bottom-line federal income tax results for all these options are similar for the corporation and the shareholder(s).

If your corporation distributes property other than cash during liquidation, it must recognize taxable gain or loss as if the distributed property had been sold for its fair market value (FMV).

As a shareholder, you treat the liquidating corporate distribution as payment in exchange for your stock. You recognize taxable capital gain or loss equal to the difference between the FMV of the assets received and the adjusted basis of the stock you surrender.

The complete liquidation of a C corporation with appreciated assets often results in double taxation—once at the corporate level and again at the shareholder level. Hence, the timing could be critical depending on your situation and future changes in tax rates. As of 2023, the maximum individual federal income tax rate on long-term gains from a corporate liquidation is 20 percent, or 23.8 percent if the 3.8 percent net investment income tax applies.

Once you decide on a complete corporate liquidation, the Board of Directors should adopt a plan and file Form 966 (Corporate Dissolution or Liquidation) with the IRS within 30 days of adopting the liquidation plan. The corporation should then file its final tax returns.

Are you ready to take your business to the next level? Imagine having a dedicated financial expert in your corner, guiding you through the complexities of financial management and helping you make informed decisions that drive growth and profitability. It's time to discover the game-changing benefits of Coach Janelle CPA's Virtual CFO Services.

Are you tired of making financial decisions in the dark? With Coach Janelle CPA as your Virtual CFO, you'll gain access to accurate, up-to-date financial information and insightful analysis. Armed with this knowledge, you can make confident, data-driven decisions that propel your business towards your goals. Empower yourself with the financial expertise needed to navigate challenges and seize opportunities with precision.

Don't let financial management hold your business back. Take that crucial first step by scheduling a consultation with Coach Janelle CPA. During this personalized session, you'll have the opportunity to discuss your business goals, challenges, and aspirations. Coach Janelle CPA will provide insights tailored to your unique situation and outline how Virtual CFO Services can propel your business forward.

Don't wait any longer to harness the power of Coach Janelle CPA's Virtual CFO Services. Schedule your consultation today and discover how our expertise can transform your business. Your success story starts now.

Remember, financial management should never hold you back. Take action, embrace the possibilities, and let Coach Janelle CPA's Virtual CFO Services be your catalyst for growth. Contact us today and embark on a journey towards financial success like never before.

About Coach Janelle CPA

Sign Up To Our Weekly Newsletter

Get the latest tax planning tips content delivered straight to your inbox.

 All Your Information is Protected When You Sign Up

Check Out Some Of Our Latest Blog Post

The Cleaning Lady and Your Home-Office Deduction

Written by Coach Janelle CPA on July 6, 2023

If you have an office in your home that qualifies for the home-office deduction and you employ a cleaning lady who maintains both your home and your home office, there are a couple of tax considerations to keep in mind.

Claim Your 2020 COVID Sick and Family Leave Credits Today

Written by Coach Janelle CPA on June 28, 2023

You may have overlooked potential COVID-19 sick and family leave tax credits on your 2020 tax return. You might be eligible for up to $15,110 in tax credits, and the good news is that it’s not too late to claim them.

Act Now to Qualify for Your 2020 and 2021 ERC Money

Written by Coach Janelle CPA on June 21, 2023

It’s 2023, but you still have the chance to qualify for the employee retention credit (ERC) for the 2020 and 2021 calendar years. This credit can potentially help you recover a significant amount of money.

One Ugly Rule for S Corp Owners Deducting Health Insurance

Written by Coach Janelle CPA on June 8, 2023

When your S corporation covers or reimburses your more-than-2-percent-shareholder-employee health insurance expenses, it classifies the payments as box 1 W-2 wages but not box 3 or box 5 wages.

Basic Estate Planning

Written by Coach Janelle CPA on June 1, 2023

You need an estate plan, regardless of whether or not you are among the ultra-rich. As recent news has shown, even those who have won the lottery or have substantial wealth can fall victim to poor estate planning.

Using Family Loans to Secure Better Home Loan Interest Rates

Written by Coach Janelle CPA on May 25, 2023

Here’s some information on how you can help a family member buy a home by making a loan to them while ensuring that you and the family member benefit from a tax-smart loan structure.

Tax Credits for Electric Vehicles: The Latest from the IRS

Written by Coach Janelle CPA on May 19, 2023

Take Advantage of the Once-in-a-Lifetime IRA-to-HSA Rollover

Health Savings Accounts (HSAs) are designed for use alongside high-deductible health plans, assisting you in covering your medical expenses. They can also function as an incredible retirement account due to their triple tax benefit:

You can deduct contributions from your taxes. Your account balance...

If I Hire My Kids, Can I Give Them Tax-Free Education Benefits?

Written by Coach Janelle CPA on April 28, 2023

If your children work in your business, consider giving them education fringe benefits. Doing this right creates tax deductions for the business, and tax-free fringe education benefits for the child. You can accomplish this without a Section 127 plan when your child needs the education to do the job for your business or to com....

Written by Coach Janelle CPA on April 21, 2023

The $75 rule applies to certain business expenses where you do not need a receipt. But we emphasize that this rule does not apply to all tax deductions. Many taxpayers mistakenly apply the $75 rule to all their tax deductions, which can result in a significant loss of deductions and penalties. We encourage you to know the...

Share Us On Social Media