Business & farm

I have the following comments:

• You should technically have a plan of liquidation drafted and then file the Form 966.
• This is just part of the expense of running a business and closing it down.
• For federal income tax purposes, a corporation does not exist after it ceases business and liquidates by paying all of its liabilities and distributing all of its assets, whether or not it continues to exist under state law.
• As you can see, there are differences between federal and state, so you need to make sure you contact your state's Secretary of State to file the appropriate forms, etc.
• When making a liquidating distribution, the corporation needs to file form 1099-DIV; copy for IRS and shareholder(s).
• Should you not file the plan of liquidation and form 966 you run the risk that any distribution(s) are just treated as a dividend.  Under the plan of liquidation, the shareholder would have the ability to subtract their basis from the distribution and then determine and gain or loss.  In the end, the result would be the same, most likely a timing difference.
• The date of liquidation is important for determining when the corporation's final income tax return is due. When liquidation occurs prior to the end of a tax year, the corporation must file a short-period tax return by the 15th day of the fourth month following the month of liquidation.
• You may want to consult with a tax professional on this matter.