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Old 04-15-2012, 04:39 PM
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C-Corp dissolution - how to report the cash distribution on Individual tax return 1040

Hi, my wife and I were the stock holders in a C-corp which was 5 years old and we filed a FINAL tax return after it ceased all operations. The CPA filed the final tax return with the following amounts:
Schedule L:
Line 15= $11,712
Line 22a = $0
Line 22b=$0
Line 25=$11,712

Schedule M-2;
Line 5a (Cash distribution): $11,712
Line 8 (Balance @end of year): $0

The CPA told me that we can issue 1099-DIV and report this money as dividend on personal tax 1040. But, I am reading different things like we need to report it as capital gains and not dividends.

Can you please let me know if I need to report as Capital Gains or Dividends? Also, what forms do I need to submit and use? If it's capital gains and as the C-Corp existed for 5 years, is it considered as Long Term capital gains? Also, for some reason, my CPA didn't show any stock value and showed it as $0, though I invested about $5,000 when I started the company. Don't know if there is a way to show it now some how as it was over 5 years ago.

If it's just capital gains tax, do I need to show it in Schedule D and show the sale of the stock as "$11,712" and show that this stock was bought for "$0.00" so that the entire amount becomes the gains?

Greatly appreciate any help in this regard.



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