Get your taxes done using TurboTax

I would strongly recommend you get some assistance from a tax professional.  There are a number of issues that come into play here:

• Did you have a plan of liquidation drafted prior to the sale of the assets?
• Depending on the response to bullet number 1, this will / may impact how this transaction gets treated
• If a plan had been drafted prior to the sale, you could distributed out the note receivable with no tax consequences and the balance sheet will be zero.
• If you did not have a plan of liquidation, you will need to keep the S corp open while receiving the installment payments.
  • You will have book and tax differences that need to be reflected on the tax return (timing).
  • The reason you need to keep the S corp open, is that distributing a note receivable (installment note) that was entered prior to having a plan of liquidation, would be treated as a taxable gain; gain without the cash is not good.
  • As noted in bullet 3, there is an exception to this rule if the installment sale was entered subsequent to a plan of liquidation and then the S corp liquidated within 12 months.
• There could be other state issues that need to be addressed.
• I don't recommend you handle this by yourself, as errors can be costly.
• Make that appointment now, before the tax professional gets any closer to the 10/15 deadline (for individuals); and possibly 9/15 deadline depending on their practice.