Closing S-Corp - Vehicle/Cash remain

[bhw3]

In 2018, a very successful S-Corp in business for 12+ years purchased 2 vehicles for the 2 shareholders use.  1 qualified for the Special depreciation allowance, the other has been depreciated using the luxury vehicle depreciation tables.  

Along came the pandemic, contracts ended, the S-Corp no longer has revenue, and is now wanting to dissolve. 

All that remains is some Cash and 1 not fully depreciated vehicle.

To close the S-Corp, would both vehicles and any other fully depreciated equipment (only computers) be disposed of at FMV and shown as a 1099-DIV liquidating distribution along with their 50% of Cash?  

Would the FMV be used on Form 4797 to calculate any depreciation recapture on the Form 1120-S?

Can the remaining cost basis be claimed for the not fully depreciated vehicle?

Is the recapture Ordinary Gain reported on the K-1?

This would then leave a -0- Balance Sheet, so can we mark it as a Final Return and notify the Secretary of State?

Thanks for your responses in advance. 

[AliciaP1 · Accepted solution]

Yes, liquidating distributions are reported on Form 1099-DIV and should report the full value of the distribution whether cash or assets.

Both vehicle "sales" should be reported on Form 4797 using FMV as the sales price per IRS Publication 544.  If the recapture results in a gain to the S-Corp for either vehicle, it is reported as an ordinary gain on the Schedule K-1s.  

And finally, yes, you will end up with a $0 Balance Sheet, you should mark the return as a Final Return and you should follow your state laws for reporting the business as closed.