Liquidating property distribution depreciation
The problem is considerably diminished if the asset is easily valued. That way the corporation (or the shareholders in an S corporation) can get the tax benefit of the loss.For example, an auto or truck (you can use a blue book), marketable securities, etc. Moreover, the sale of business assets at a loss generally produces ordinary loss.The shareholder's basis in the property is the property distributed is the fair market value. Selling the asset to the other company may not be the answer. Simply transferring the property will generally be deemed to be a dividend (or distribution) from the company to the shareholders followed by a capital contribution to the new company. (That's when the S corporation was a C corporation when the asset was purchased and it appreciated in value.) That's another complex issue.That's an problem if the shareholder wants to use the property in another business. We've also simplified the discussion by ignoring property that's encumbered by a loan.
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Consult your tax adviser before making any distributions of property from a partnership or LLC. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered.