voluntary dissolution and liquidating distribution
I'm the sole and original stockholder of a C corporation. Capitalized in 2001 w/$100 cash for 100 shares common. I contributed add'l cash as "Additional Paid-In Capital" in 2004, now stands at $48,000. Retained Earnings is deficit ($30,866). By 12/31/08, it had ceased operations, sold all assets at book value and satisfied ALL liabilities. No cash or property was left to distribute to shareholder. As of 12/31/08, 1120 Sch L: line 15=$0, line 22b=$100, line 23=$48,000, line 25=$-30,866, line 28=$17,234. So line 15 and line 28 don't balance.
I now wish to complete its voluntary dissolution and file form 966 along with its 1120, but I don't know how to treat this on the 1120. Since there is no cash or property to disribute, Sch M-2 lines 5a,b,c don't work. Should I record a $17,234 liquidating distribution on M-2 line 6? If so, then M-2 line 8 increases its deficit to -$48,100. This would then make Sch L line 25 be -$48,100 and decrease Sch L line 28 to $0, which would then balance with Sch L line 15. Would this liquidating distribution be a non-taxable return of capital? Would this liquidating distribution create a capital loss for me? If, so, what would the amount of such loss be? Does it require the issuance of a 1099-DIV to me? Where would I report it on my 1040 Sch D?
Or, is there another more simple way of accounting for a voluntary dissolution. For instance, instead of a liquidating distribution, could the company simply buy my now worthless stock for $0.00, which then allows me to take a capital loss equal to the difference between the Additional Paid-In Capital and the Retained Earnings, which would be $17,134. This seems like a better way, perhaps. Thank you very much !