Effects of Liquidation on Liquidating Shareholders Amount of recognized gain or loss Character of gain or loss Basis of property received by shareholder 6
6 Effects of Liquidation on Liquidating Shareholders Amount of recognized gain or loss Character of gain or loss Basis of property received by shareholder
Amount of Recognized Gain/Loss Shareholder assumed to have sold stock for FMv of net assets received FMV of assets-liabilities received Basis of stock surrendered Amount of gain(loss) recognized
7 Amount of Recognized Gain/Loss Shareholder assumed to have sold stock for FMV of net assets received FMV of assets - liabilities received - Basis of stock surrendered = Amount of gain (loss) recognized
Character of Gain/Loss General rule Gain or loss treated as capital transaction Exceptions 81244 stock receives ordinary loss treatment(subject to limitations) Losses sustained by a parent in a worthless stock investment in a controlled subsidiary receive ordinary loss treatment 8
8 Character of Gain/Loss General rule –Gain or loss treated as capital transaction Exceptions –§1244 stock receives ordinary loss treatment (subject to limitations) – Losses sustained by a parent in a worthless stock investment in a controlled subsidiary receive ordinary loss treatment