Video: Complete Liquidation of a Corporation

In this lesson, Nick Palazzolo, CPA, walks through the intricacies of complete liquidation for corporations, specifically addressing the tax implications for shareholders. Providing practical examples, he breaks down how shareholders must treat received property or cash as full payment for their stock, resulting in a capital gain or loss. Nick illustrates the process of calculating this gain or loss by considering the fair market value of the received assets versus the shareholders’ basis in the stock—factoring in adjustments such as stock splits and dividends. He explains the special tax-free liquidation rules for an 80% or more owned subsidiary and the concept of carryover basis, which affects how gain or loss is recognized upon the sale of those assets by the parent company. The lesson is rounded off with a tangible example of capital gain calculation upon the sale of such an asset.