Assets distributed to shareholders on dissolution of S-Corp

[eliz1]

Our Farm S-Corp dissolved leaving some cash and depreciated assets to be distributed to shareholders.  Turbotax is telling me to dispose of all the remaining assets in the "Disposition of Farm Assets" screen.  The only choices in that screen are:  sold, stolen, casualty loss, given away, and disposed by some other means.  The last option seems to be the one to choose, but it says you no longer own the asset - in effect, it has been scrapped.  Which should I choose, because TTax will not let me go forward without disposing of these assets.  On a previous screen dealing with the dissolution of the S-Corp, I entered the fair market value of these assets as a distribution of property to the shareholders.

[Mike9241]

you indicate that the assets were sold at FMV since this is in dissolution of the S-corp. Thus there will be gain or loss recognized. 

When appreciated property (property that has an FMV in excess of its adjusted basis) is distributed, gain is recognized in the same manner as if the S corporation had sold the property to the shareholders at its FMV (Sec. 311(b) via Sec. 1371(a)). The gain passes through to the shareholders and increases their basis in their stock. No loss is allowed, however, if the distributed property has an FMV that is less than the corporation’s tax basis in such property. (Under Sec. 336, a loss can be recognized if the distribution is in liquidation of the corporation.) The shareholder’s basis in the distributed property is its FMV (Sec. 301(d)).

[eliz1]

Thank you so much, Mike. This was great information and cleared up several questions I had.