You need to meet with a tax professional who understands corporate liquidations.
Some items to understand and document:
- Is there an actual plan of liquidation?
- When was the plan of liquidation adopted?
- One of the reasons C corporations are not always the best choice of entity structure, is that property distributions are deemed to have been sold when distributed, and gain is recognized at the C corporation level.
- The corporation must recognize in the year of liquidation all unrecognized gain on installment obligations distributed to the shareholders in accordance with Section 336(a) and Section 453B(a). The amount of gain recognized is the difference between the FMV at the date of distribution and the corporation's basis in the obligation. This rule applies both to installment obligations arising from sales occurring before the date of adoption of the plan of liquidation and those occurring after the date of adoption of the plan of liquidation.
- You currently have zero basis in your Goodwill and no payments (no cash to pay the tax) for possibly 25 years according to your facts, and apparently there is a FMV set on the note since there has been a sale. This is a horrible situation and I recommend you get some professional advice.
- You could also potentially, depending on the facts related to the adoption of a plan of liquidation, have a second level of tax at the shareholder level AND based on your facts, no cash to pay the tax; at either level.
*A reminder that posts in a forum such as this do not constitute tax advice.
Also keep in mind the date of replies, as tax law changes.
