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Level 1
March 14, 2023
Solved

Dissolving an S-Corp?

  • March 14, 2023
  • 2 replies
  • 20 views

I have an 1120S client that is dissolving the S-Corp. All that is left on S-Corp’s balance sheet is Cash in the bank, common stock and retained earnings.  It is a husband wife ownership 50% each.  If I distribute the cash from the bank account to the two owners, which have enough basis in there capital accounts to cover the distribution, would this be tax free?  Or, should the distributions be treated as Capital long-term gains?

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Best answer by IRonMaN

Based of the facts presented - tax free

2 replies

IRonMaN
IRonMaNAnswer
Level 15
March 14, 2023

Based of the facts presented - tax free

Slava Ukraini!
dascpa
Level 11
March 14, 2023

Assuming no other issues out there, this is not a capital gain.  Debit Equity, Credit Cash.  It's a just return of equity at no gain or loss.