Final tax return balance sheet when dissolving S-Corp

[MIsaak]

Good day,

I am closing a small S-Corp, and I am having problems understanding how the final Balance Sheet should appear.  I understand that the overall Total Assets and Total Liabilities/Equity should each equal zero, but I am not sure about some of the internal lines, particularly those in the Liabilities section.  The Asset section already has zeros for all of its rows.  I would really appreciate any insight.  Thank you very much.

The current values for the Liabilities/Equity section are roughly:

  - Loans from Shareholders = $75,000

  - Capital Stock = $1,000

  - Additional Paid-in-Capital = $40,000

  - Retained Earnings = ($116,000)

Is it appropriate for a final tax return's balance sheet to still contain these values, or should one or all be made $0?

What about when shareholders are given any remaining tangible assets as "payment in full for the exchange of their stock" but whose FMV won't even come close to totaling the loans given over the years by the shareholders?

[M-MTax]

If you've got assets they need to be distributed. If you have liabilities an adjustment needs to be made to capital accounts. Ending balances should ALL be zero.

[MIsaak]

Thank you for the response.  I am unfortunately still a little confused.  

I am not sure what is meant by "capital accounts".  Does it mean the "Retained Earnings" line?

When the assets get distributed to the shareholders, is that somehow reflected in the Liabilities section of the Balance sheet?

Am I correct in understanding that "Ending balances should ALL be zero" means that every single line in the balance sheet should be zero, not just the Totals?  There shouldn't be any values other than zero anywhere in the End of Year Balance columns.

Thank you again, I really do appreciate the help.  I have been trying to figure this out for two weeks.

[M-MTax · Accepted solution]

Yes in that the lines should all be zeroed out and you need to make adjustments. Your capital accounts.....RE.....should be zero as they are usually reduced by distributions made.