Your bullets 2 and 3 are correct.
Liquidating distributions are treated as deemed sale at FMV. Gain is reported at the S corp level and you will have depreciation recapture.
liquidating distributions are reported on form 1099-DIV.
You will then determine your gain or loss on the sale of the S Corp stock.
You will then start depreciation over based on the FMV of the property distributed.
*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.
