S Corporations: Tax Considerations when Liquidating

Summary

This practice note discusses the tax issues which arise in the liquidation of an S corporations. The tax analysis of the liquidation of an S corporation is the same as for a C corporation. Whether the payment is made in property or money, the funds are treated as the consideration exchanged for the stock. However, the unique tax treatment afforded to S corporations brings with it further complexities and tax issues, including the pass thru tax treatment and built in gain rules. This practice note will discuss and explore such tax considerations. Additionally, there are planning strategies which can minimize the tax consequences of such transactions depending on the particular facts and circumstances.