The company’s operations are brought to an end, and its assets are divvied up among creditors and shareholders, according to the priority of their claims. Not all bankruptcies involve liquidation; Chapter 11, for example, involves rehabilitating the bankrupt entity and restructuring its debts.Liquidation is the process of bringing a business to an end and distributing its assets to claimants.
On November 22, 2013 (the "Petition Date"), FAH Liquidating Corp.
(fka Fisker Automotive Holdings, Inc.) and FA Liquidating Corp.
(fka Fisker Automotive, Inc.) (the "Debtors") filed voluntary petitions in the United States Bankruptcy Court for the District of Delaware seeking relief under the provisions of Chapter 11 of the United States Bankruptcy Code.
The Debtors continue to operate their businesses and manage their properties as debtors-in-possession.
Despite not knowing the fair market value and basis of corporations’ assets, we can describe the general tax consequences to corporation and shareholder when liquidating an S corporation.
When a corporation distributes an asset to a shareholder, the shareholder’s stock basis increases by the gain recognized in that distribution and decreases by the fair market value of the asset being distributed.
tax election and is governed by subchapter S, unless contradicted by subchapter C or otherwise indicated. S corporations are advantageous to small businesses because the business itself is not subject to federal taxation (although, some states subject S corporations to taxation); only the S corporation shareholders are subject to federal taxation.
C., a “small business corporation” is a domestic corporation that meets certain statutory criteria.
In the simplest terms, this means selling the position for cash; another approach is to take an equal but opposite position in the same security, for example, by shorting the same number of shares that make up a long position in a stock.
A broker may forcibly liquidate a trader’s positions if the trader’s portfolio has fallen below the margin requirement or she has demonstrated a reckless approach to risk-taking.
In a typical transaction, the gain recognized, if any, is the difference between the basis (the cost) and the fair market value of the asset being sold or distributed.