Liquidating and non liquidating distributions d capri dating
Because the income of S corporations is taxed to the owners when the income is earned, a mechanism is needed to ensure that the shareholder is not taxed again when the earnings are distributed.This is done through a system of rules that track and adjust the shareholder’s stock basis.
The corporation will recognize gain or loss if the amount realized (or the property’s value) differs from the corporation’s basis in the distributed asset.The tax treatment of a distribution, however, depends on whether it is a Current Distributions A current distribution is a distribution that does not terminate a partner’s interest in the partnership.If, however, a distribution is part of a series of distributions that will result in the termination of the partner’s interest, the distribution is not a current distribution.This allows partners to defer recognition of gain in appreciated property that they receive from the partnership.
In contrast, distributions of appreciated property by C corporations and S corporations are treated as though the property were sold to the shareholder at fair market value.
But now that I'm settled in, I'm excited to get back to providing what no one ever really asked for: an in-depth look at a narrow area of the tax law. As you will see, the regime governing partnership distributions is drastically different from the one governing corporate distributions.