Cash basis liquidating distributions
Wechter August 23, 2012 AICPA Corporate Taxation Insider The "one-day note" is a popular planning technique for a Sec.
338(h)(10) installment sale of the stock of an S corporation where the S corporation is deemed to have liquidated.
Under this technique, the deemed distribution of a one-day note from the S corporation to its shareholders mirrors the favorable tax treatment of an S corporation's selling its assets in exchange for an installment note and remaining in existence, distributing the payments on the note to its shareholders. 453, 453B, and 338(h)(10) were issued, practitioners hoped that the same treatment would result whether or not the S corporation remained in existence.
As a result of the fact that the maximum corporate tax rate exceeds the maximum individual rate for the first time in seventy-three years, there is renewed interest in "pass- through" entities (i.e., S corporations and partnerships) as tax-favored ways of conducting a business.A fine line exists between definitions of a corporate liquidation and dissolution.