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Old 01-11-2014, 05:17 PM
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What is Taxable in the C-corp

I have a c-corp that closed in 2013. My question is besides selling equip out of the c-corp what else is taxable? He still has money in the checking account and he is keeping the pickup that was put into the c-corp.

Is any of this considered a dividend



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Old 01-11-2014, 10:37 PM
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Originally Posted by sportmommy3 View Post

#1;I have a c-corp that closed in 2013. My question is besides selling equip out of the c-corp what else is taxable?


#2;He still has money in the checking account and he is keeping the pickup that was put into the c-corp.


#3;Is any of this considered a dividend
________________________________________
#1;if you are in process of selling pieces of real estate owned by corp. When sold, the capital gain on the real estate will be taxed to corp. If you'll be selling off some business assets to recoup some of your investment, you'll need to file Form 4797.If you're selling all of your business assets as a group, you may need to file IRS Form 8594 instead. The assets that are sold are compared to their depreciated basis and the difference is treated as ordinary income to the C Corp. Any good will is a 100% gain and again is treated as ordinary income. This new found income drives up your corporate tax rate, often to the maximum rate of around 34%. You are not done yet. The corp pays this tax bill and then IF there is a distribution of the remaining funds to the shareholders. They are taxed a second time at their long term capital gains rate.Compare this to a C Corp stock sale. The stock is sold and there is no tax to the corporation. The distribution is made to the shareholders and they pay only their LTCG on the change in value over their basis. The difference can be hundreds of thousands of dollars. Another approach you can use is Personal Good Will. This is where the seller's reputation, expertise, and relationships are in effect separated from the assets of the company and account for as much of the good will value as possible from the business. So let's say that the company sells for $10 million dollars and the amount allocated to the hard assets is $8 million. That leaves $2 million that can be classified as good will. If that good will is assigned to the C Corp, it will be taxed at the 34% rate and then taxed again when it is distributed to the shareholders at 15%.


#2;As mentioned above.



#3;i gues it depends. Distributions in complete liquidation treated as exchanges .Amounts received by a shareholder in a distribution in complete liquidation of a corporation shall be treated as in full payment in exchange for the stock.
IF there is a distribution of the remaining funds to the shareholders. They are taxed a second time at their personal long term capital gains rate. This is often called the double taxation issue of a C Corp asset sale.

Compare this to a C Corp stock sale. The stock is sold and there is no tax to the corporation. The distribution is made to the shareholders and they pay only their long term capital gain on the change in value over their basis in the stock. The difference can be hundreds of thousands of dollars and for larger transactions, millions of dollars.



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