Liquadating c corporation

After a shareholder's stock basis is reduced to zero, any additional distributions are treated as capital gains.Assuming the gains are long-term because the stock has been held for more than a year, the maximum individual federal income tax rate is 20% for high income taxpayers.As such, the withdrawals triggered capital gains and taxable dividends for the shareholders.

liquadating c corporation-11

Withdrawals from each layer have different tax consequences.

Corporate Distribution Basics For federal income tax purposes, non-liquidating distributions paid by C corporations to individual shareholders can potentially fall into three different layers.

Withdrawals from each layer have different tax consequences.

Corporate distributions of cash or property are classified as taxable dividends to the extent of the corporation’s current or accumulated earnings and profits, which is a tax accounting concept that is somewhat similar to the financial accounting concept of retained earnings.

The maximum federal income tax rate on C corporation dividends is 20 percent for single people with taxable income above $400,000 ($450,000 for married joint-filing couples).

Last modified 24-May-2020 04:22