For those situations you will need to follow the appropriate accounting rules.he shareholder consequences of a complete liquidation of an S corporation are governed by Secs. The dividend rules that otherwise apply to corporate distributions are not applicable to distributions in complete liquidation.If the shareholder assumes known corporate liabilities or receives corporate property subject to a liability (such as the distribution of mortgaged land), the amount realized is reduced by the amount of the liability (Ford, 311 F2d 951 (Ct. It appears that the adjusted basis of stock held in a liquidating corporation is adjusted for current-year passthrough items prior to determination of gain or loss from the receipt of the liquidating distributions (see Regs. The 2007 distribution is allocated the same as before.recognizes no gain or loss on Block 2 (,000 – ,000 basis) and has a remaining basis of ,000 in Block 2.Distributions received by the shareholder are treated as payment in full for the exchange of stock. The shareholder recognizes gain when the adjusted basis of each block has been recovered, while loss is not recognized until the corporation has made its final distribution.
The requires that the cost of plant assets be allocated to depreciation expense.This means that over a plant asset's useful life some of the plant asset cost is matched with revenues on the income statement.Therefore the plant asset's carrying amount will be decreasing each period.Notwithstanding the broad scope of the United States Bankruptcy Code and the power of the Bankruptcy Courts, there are still securities issues to be considered.
One possible component of a bankruptcy reorganization or liquidation is a liquidating trust.The prohibits a company from showing a gain from merely holding a plant asset.