Naturally, it's now the 11th hour, I'm doing our personal taxes now, and am again befuddled by the closing of the C-corp impact on our taxes. The C corps's return of our initial investment to my spouse and me (total of $2250 each reported on 1099-DIVs as "cash liquidation distribution", box 8, for 2016). Nothing has appreciated in value. We just parked our money in a C-corp that never got off the ground - didn't gain, didn't lose, $ was basically static.
In your (Wnhough) words, "unless a shareholder recovers her total investment, the amount reported on a 1099-DIV is not considered taxable income".
So: in that we are recovering our total investment, we are now liable for capital gains tax on the return of the $4500 (filing jointly, $2250 each), correct? My tax prep program looks to be appropriating that $4500 as capital gains. Just want to be sure I'm proceeding correctly.
Thanks in advance for any feedback.