lovedating nm ru - Consequences of liquidating

Witness the situation described in recent letter from the Internal Revenue Service (LTR 200806006, November 7, 2007), which addresses a seeming anomaly related to the tax code.

The anomaly is corporate dissolution without liquidation.

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Partners, however, can only take a loss on their returns if it's solely the result of a liquidating distribution of cash, outstanding partnership receivables or inventory items.

If the partnership distributes property -- anything other than cash and property treated as cash -- during its liquidation, it has no immediate tax effect.

Only partners who receive a liquidating distribution of cash may have an immediate taxable gain or loss to report.

The value of marketable securities, such as stock investments that are traded on a public stock exchange, and decreases to your share of the partnership's debt are both treated as cash distributions.

Instead, gain or loss is delayed until you sell the property.

Provided the liquidation terminates your entire interest in the partnership, your tax basis in the distributed property is equal to your adjusted basis in the partnership interest minus the cash distributed to you.

As a result, the tax effects of a partnership that makes liquidating distributions only impacts the partners who receive them.

To be taxed as a liquidating distribution, however, a partner's interest in the partnership must terminate.

At issue is whether the company’s status as a corporation had been terminated by the administrative dissolution. Something else to consider is that under Section 336(a) of the tax code, a gain or loss is recognized by a liquidating corporation on the distribution of its property in complete liquidation, as if such property were sold to the distributee at its fair market value. 142 ) states that “…where a corporation ceases business operations, has retained no assets, has no income, and has actually liquidated, there is in effect a de facto dissolution, even though the corporation has not been formally dissolved…” In addition, it is entirely possible for the corporation to continue in existence even though it has been, as a matter of state law, dissolved.

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