Liquidating Your Assets Handling Your Financial Obligations Making Your Final Distributions Community Q&A If you are faced with closing your business and you were unable to locate a buyer to purchase the business in its entirety, you should consider selling/liquidating your business’s assets.
There are variety of reasons to close a business, including poor results, owner retirement or poor health, or the loss of a franchise arrangement.
Under § 1.1274-2, the issue price of the obligation on February 1, 1998, is ,368,450.
Accordingly, the obligation has 1,550 of original issue discount (,000,000-,368,450).
Except as otherwise provided, assume in each example that A, an individual who is a calendar-year taxpayer, owns all of the stock of T corporation. On February 1, 1998, T, an accrual method taxpayer, adopts a plan of complete liquidation that satisfies section 453(h)(1)(A) and immediately sells all of its assets to unrelated B corporation in a single transaction.
The examples are as follows: The stated purchase price for T's assets is ,500,000.
For example, if the stock of a corporation that is liquidating is traded on an established securities market, an installment obligation distributed to a shareholder of the corporation in exchange for the shareholder's stock does not qualify for installment reporting pursuant to section 453(k)(2).
For purposes of the preceding sentence, if the qualifying installment obligation is subject to § 1.446-2 (e.g., a debt instrument that has unstated interest under section 483), the adjusted issue price of the obligation is determined under § 1.446-2(c) and (d).
While the process of closing a business is very difficult for many reasons, it is important to make sure you get the best value for your assets, pay your employees, satisfy your creditors, and comply with state and federal laws.
Never advertise it as a going out of business sale.
A's gross profit ratio is thus 96 percent (gross profit of ,363,188 divided by total contract price of ,463,188).
Under §§ 1.446-2(e)(1) and 1.1275-2(a), ,527 of the 0,000 payment is treated as a payment of the interest and original issue discount that accrued on the obligation from July 31, 1998, to January 31, 1999 (,000 of qualified stated interest and ,527 of original issue discount).
Assume that for purposes of section 1274, the test rate on February 1, 1998, is 8 percent, compounded semi-annually.