Business & farm

I have the following comments:

• Just because you were the 100% owner does not guarantee that all losses are at-risk.
• Your comment that you "paid for the losses" indicates to me that you contributed capital to the S corporation.
• A liquidating distribution from an S corporation is reported on form 1099-DIV.  The amount reported in boxes 8 and / or 9 will be FMV.  Your facts indicate that all assets were sold and you are only distributing out cash.  The amount of actual cash distributed will be reported in box 8.
• The amount reported on the 1099-DIV as a cash distribution will not be reflected on your 1120S; not on Sch K, your K-1 or in the AAA.
• As an S corporation shareholder you should have been maintaining a basis schedule of your investment in the S corporation.  This basis schedule is very important as this will now determine your overall gain or loss on this investment.
• You should complete the 1120S as you would normally.  Make sure the return is marked final.  Update your basis schedule for this final K-1.
• Once your basis schedule is updated for the final K-1, you now compare your liquidating distribution to your basis.  If after adjusting the basis schedule for the liquidating distribution you have basis remaining, then you have a capital loss for the remaining basis.  If after adjusting for the liquidating distribution your basis goes below zero (negative), you have a capital gain for this "negative" amount which essentially places your basis back to zero.