Business & farm

@Maxtax899 

Previous response was not correct.

Here are my responses:

• As an S corporation, each shareholder should have been maintaining a tax basis schedule of your investment in the S corporation (LLC, but taxed as an S corporation for tax purposes).
• The liquidating distributions should not be reflected on the tax return; Schedule K or K-1.
• All liquidating distributions should be reported on form 1099-DIV and issued to the respective shareholder(s) in box 9 or 10 as appropriate.
• Once the shareholder updates their tax basis schedule for the final K-1, you will compare your liquidating proceeds to your tax basis.  This determines your overall gain or loss.
  • If the liquidating proceeds exceed your tax basis, you have a capital gain
  • If the liquidating proceeds are less than your tax basis, you have a capital loss
  • When inputting this into TT (when completing your personal tax return), you will indicate this is a final K-1 and TT will have some follow-up questions.
  • Your liquidating distributions will be the selling price and your tax basis will be the cost basis
  • TT will handle the rest