Final return after dissolving S Corp

[Maxtax899]

This should be painfully easy but I am struggling with this question. I dissolved an S Corp recently and have followed the dissolution and winding down guidelines. Everything is square with the state and I am currently under a filing extension with the IRS. The business was started years ago as a multi-member LLC and we obtained S Corp status soon after. Never operated as a C Corp. All that we had at closing was a bank account with $2,471 and approximately $500-$600 of tools that I would rather just keep for my own use in the future. I am trying to figure out how I report this liquid cash from the bank and value of tools on our final return. Does it go on schedule K-1 or a 1099-DIV ? I am sure it will need to be reported on personal taxes. Any help would be appreciated!

[RobertB4444]

Neither.  Cash in a bank account was already taxed as income when you filed the return and received the money.  Cash in the bank account would go on the balance sheet and then be distributed to the partners in order to reduce their basis to zero.

@Maxtax899 

[Maxtax899]

Thank you for your help. Just to clarify, The $2,472 was in our S Corp bank account. And now has been deposited to a personal account. You said, "Cash in a bank account was already taxed as income when you filed the return". Which return are you referring to? Corporate or personal? And doesn't it need to be reported somewhere? I do appreciate the help!!

[RobertB4444]

When you made money in the S-Corp it was shown as income on the corporate return and then you paid taxes on it on your personal returns.

What you do with that money after you pay taxes on it is not the IRS's business.  They already got their cut.  So if the money went into an account for the business that doesn't reflect as something taxable for the future.  You guys already paid taxes on it.

@Maxtax899 

[Rick19744]

@Maxtax899 

Previous response was not correct.

Here are my responses:

• As an S corporation, each shareholder should have been maintaining a tax basis schedule of your investment in the S corporation (LLC, but taxed as an S corporation for tax purposes).
• The liquidating distributions should not be reflected on the tax return; Schedule K or K-1.
• All liquidating distributions should be reported on form 1099-DIV and issued to the respective shareholder(s) in box 9 or 10 as appropriate.
• Once the shareholder updates their tax basis schedule for the final K-1, you will compare your liquidating proceeds to your tax basis.  This determines your overall gain or loss.
  • If the liquidating proceeds exceed your tax basis, you have a capital gain
  • If the liquidating proceeds are less than your tax basis, you have a capital loss
  • When inputting this into TT (when completing your personal tax return), you will indicate this is a final K-1 and TT will have some follow-up questions.
  • Your liquidating distributions will be the selling price and your tax basis will be the cost basis
  • TT will handle the rest