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Old 04-16-2017, 12:54 AM
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Join Date: Dec 2016
Posts: 6
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.



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  #12 (permalink)  
Old 04-16-2017, 01:42 AM
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Join Date: Dec 2016
Posts: 6
to add to my post, sent too quickly ...

in re-reading all of this (our correspondence) , I am wondering if I made a mistake in completing K-1s (prior to your advice, Wnhough)?

So, that being the case (me possibly being overzealous in that I filed K-1 + 1099-Div for the same final distribution (return of initial investment) of $2250 per shareholder/partner...?

(1) do I need to clean this up by sending in any amended forms by the C-Corp?

(2) and now, in filing my personal taxes, do I enter the 1099-Div information or K-1 information - or does it ultimately matter - wondering if this has different effect on Scd.D, cap gains, tax liability.

Please forgive my ignorance, just can't get my head around all of this.

Thanks again.



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