However, in case all debts to creditors have been fully satisfied, there is a surplus left to divide among equity-holders.This mainly occurs during voluntary liquidations of solvent corporations.There are subtle (and some not so subtle) differences between the two entities from a tax perspective as well.One significant difference exists with respect to distributions of appreciated property. This article previously appeared in the Tax Assessment newsletter, published by the North Carolina Bar Association, and is reprinted with permission.Tax Management Portfolio, Corporate Liquidations, No. 784-3rd, analyses the tax considerations in connection with the liquidation of a corporation. The principal focus of the Portfolio is on liquidations after the repeal of the General Utilities doctrine by the Tax Reform Act of 1986. Corporations are the most widely known business forms, providing limited liability to shareholders and allowing ownership to be freely transferred through the buying and selling of stock.C corporations are also subject to what is known as "double taxation." This type of tax treatment means that income and gains on property are taxed first at the corporate level and then again at the individual shareholder level for any dividends received.
784-3rd, analyses the tax considerations in connection with the liquidation of a corporation. Evolution of the Tax Treatment of Corporate Liquidations B.
Additionally, funding for the corporation can be increased by selling shares of stock.
However, the tax advantages must be weighed against a greater complexity of operations, complex tax rules, and legal and accounting costs.
The Portfolio highlights traps for unwary taxpayers and discusses planning opportunities in connection with a corporate liquidation.
When a company has more liabilities than assets, equity is negative and no liquidating distribution is made at all.
The principal focus of the Portfolio is on liquidations after the repeal of the General Utilities doctrine by the Tax Reform Act of 1986. Bar Taxation Section (Section Chair; Member and Former Chair of the Corporate Tax Committee); American Bar Association Tax Section (Vice Chair, Professional Services Committee; Member, Corporate Tax Committee; Member, Government Relations Committee); frequent speaker and author of various tax articles. Legislative History of the Repeal of the General Utilities Doctrine 1.