When my parent’s died, part of their estate was a small real estate corporation. The only asset was a pending lawsuit. Their accountant at the time valued that lawsuit at 15K for estate purposes. The lawsuit was settled for 45K…after legal fees, expenses, etc was left with around 25K. I decided to close out the corporation and take the 25K as a dividend as the only stockholder. I remember the old accountant said that I could use the 15K stated in the estate as the cost basis, and only pay 15% dividend tax on the difference. I am confused on where that cost basis would be claimed against a dividend tax. I could see if I sold the company outright to another individual, I would use the 15K as CB on a SchD. I would ask the old CPA but he is not around any more. Thanks for any input…
I’ll guess your old CPA planned to report this as a liquidating distribution rather than as a dividend.
It is a corporate liquidation, but I have no further experience.
Meant to link to this before. If link doesn’t work, it’s IRS Pub 550. http://www.irs.gov/publications/p550/ch01.html#en_US_publink100010095
Thanks…but I am sort of confused…is a liquidation dividend taxed at 15% w/o Sch D …or as a long term capital gains on Sch D?(which I think.rate is 5-15%)…I would think a dividend would not be reported on D but maybe liquidation “dividend” is a misleading term and is actually like a stock sale…
When it comes to your taxes, we have a new leadership and a new “rule of thumb:” If it’s hard to figure out, or if it’s even slightly confusing… just pull a Geitner.