Tax Law (Questions About Taxes)/Final 1120-S return

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Question
I am filing final 1120-S return, Corporation had no income for last 2 years, filed returns showing only expenses for % and bank fees, and taxes. Have some equipment that has been depreciated, and land. How do I properly dispose/distribute the property on the final return? Only one shareholder, no cash, no liabilities (except loans from shareholder). All equipment and land would go to the shareholder. Do I have to do recapture of depreciation if I have only salvage value on the equipment?
Thank you

Answer
Robert,

Thanks for your question.

Two factors involved here.

First, the property should be treated as a liquidating distribution to the shareholder. The distribution will be at fair market value, so the corporation should report the distributions as a deemed sale to the shareholder, recognizing any gain on the distributions.

Second, the shareholder will receive the distributions valued at FMV and treat that as proceeds from the sale of stock, reporting capital gain or loss on the deemed sale of the stock (unless Sec 1244 applies, then report the loss as ordinary up to statutory limits).

Hope this helps.

John Stancil, CPA

Tax Law (Questions About Taxes)

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John Stancil, CPA

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I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I am Professor Emeritus at Florida Southern College. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at www.mybaldcpa.com. I also offer seminars and consultations to churches and clergy on their tax issues at www.churchtaxsolutions.com Also visit my blog, www.thetaxdocspot.com. I am listed on Tax Connections at https://www.taxconnections.com/profile/John-Stancil/12258973 Prepare and file your own taxes at www.1040stancilcpa.com

Experience

I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

Organizations
FICPA, NATP, NCPE Fellowship, Lakeland Business Leaders

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The CPA Journal, Florida CPA Today, Green Consumer, Green Business, Global Sustainability as a Business Imperative, Palmetto Review, NATP TaxPro Quarterly, Mustang Journal of Finance and Accounting.

Education/Credentials
DBA University of Memphis MBA University of Georgia BS in Accounting Mars Hill University

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