A nonliquidating distribution

( Indeed, Congress regularly wrestles with this very issue: Whenever the business profits of a corporation are subjected to a tax there is that much less profit to reinvest in the business’s growth (it can hire fewer taxpaying employees, for example) as well as that much less wealth to distribute to the shareholders (who might then re-invest those distributed earnings in other profit-making ventures).Just how much of the corporation’s profits should be redirected to the federal fisc through taxation rather than back into the economy in general is a never-ending debate in Washington. Had the shareholder been holding the building for investment and sold it for

( Indeed, Congress regularly wrestles with this very issue: Whenever the business profits of a corporation are subjected to a tax there is that much less profit to reinvest in the business’s growth (it can hire fewer taxpaying employees, for example) as well as that much less wealth to distribute to the shareholders (who might then re-invest those distributed earnings in other profit-making ventures).Just how much of the corporation’s profits should be redirected to the federal fisc through taxation rather than back into the economy in general is a never-ending debate in Washington. Had the shareholder been holding the building for investment and sold it for $1,000,000, the $900,000 in resulting gain would likely have been considered capital gain.The basis of property (other than money) distributed by a partnership to a partner in liquidation of the partner’s interest shall be an amount equal to the adjusted basis of such partner’s interest in the partnership reduced by any money distributed in the same transaction. 105–34, § 1061(a), amended heading and text of subsec. Prior to amendment, text read as follows: “The basis of distributed properties to which subsection (a)(2) or subsection (b) is applicable shall be allocated— “(1) first to any unrealized receivables (as defined in section 751(c)) and inventory items (as defined in section 751(d)(2)) in an amount equal to the adjusted basis of each such property to the partnership (or if the basis to be allocated is less than the sum of the adjusted bases of such properties to the partnership, in proportion to such bases), and “(2) to the extent of any remaining basis, to any other distributed properties in proportion to their adjusted bases to the partnership.” Subsec. It is not guaranteed to be accurate or up-to-date, though we do refresh the database weekly.first to any unrealized receivables (as defined in section 751(c)) and inventory items (as defined in section 751(d)) in an amount equal to the adjusted basis of each such property to the partnership, and if the basis to be allocated is less than the sum of the adjusted bases of such properties to the partnership, then, to the extent any decrease is required in order to have the adjusted bases of such properties equal the basis to be allocated, in the manner provided in paragraph (3), and then, to the extent any increase or decrease in basis is required in order to have the adjusted bases of such other distributed properties equal such remaining basis, in the manner provided in paragraph (2) or (3), whichever is appropriate. More limitations on accuracy are described at the GPO site.first to properties with unrealized appreciation in proportion to their respective amounts of unrealized appreciation before such increase (but only to the extent of each property’s unrealized appreciation), and first to properties with unrealized depreciation in proportion to their respective amounts of unrealized depreciation before such decrease (but only to the extent of each property’s unrealized depreciation), and For purposes of subsections (a), (b), and (c), a partner who acquired all or a part of his interest by a transfer with respect to which the election provided in section 754 is not in effect, and to whom a distribution of property (other than money) is made with respect to the transferred interest within 2 years after such transfer, may elect, under regulations prescribed by the Secretary, to treat as the adjusted partnership basis of such property the adjusted basis such property would have if the adjustment provided in section 743(b) were in effect with respect to the partnership property.

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( Indeed, Congress regularly wrestles with this very issue: Whenever the business profits of a corporation are subjected to a tax there is that much less profit to reinvest in the business’s growth (it can hire fewer taxpaying employees, for example) as well as that much less wealth to distribute to the shareholders (who might then re-invest those distributed earnings in other profit-making ventures).

Just how much of the corporation’s profits should be redirected to the federal fisc through taxation rather than back into the economy in general is a never-ending debate in Washington. Had the shareholder been holding the building for investment and sold it for $1,000,000, the $900,000 in resulting gain would likely have been considered capital gain.

,000,000, the 0,000 in resulting gain would likely have been considered capital gain.The basis of property (other than money) distributed by a partnership to a partner in liquidation of the partner’s interest shall be an amount equal to the adjusted basis of such partner’s interest in the partnership reduced by any money distributed in the same transaction. 105–34, § 1061(a), amended heading and text of subsec. Prior to amendment, text read as follows: “The basis of distributed properties to which subsection (a)(2) or subsection (b) is applicable shall be allocated— “(1) first to any unrealized receivables (as defined in section 751(c)) and inventory items (as defined in section 751(d)(2)) in an amount equal to the adjusted basis of each such property to the partnership (or if the basis to be allocated is less than the sum of the adjusted bases of such properties to the partnership, in proportion to such bases), and “(2) to the extent of any remaining basis, to any other distributed properties in proportion to their adjusted bases to the partnership.” Subsec. It is not guaranteed to be accurate or up-to-date, though we do refresh the database weekly.first to any unrealized receivables (as defined in section 751(c)) and inventory items (as defined in section 751(d)) in an amount equal to the adjusted basis of each such property to the partnership, and if the basis to be allocated is less than the sum of the adjusted bases of such properties to the partnership, then, to the extent any decrease is required in order to have the adjusted bases of such properties equal the basis to be allocated, in the manner provided in paragraph (3), and then, to the extent any increase or decrease in basis is required in order to have the adjusted bases of such other distributed properties equal such remaining basis, in the manner provided in paragraph (2) or (3), whichever is appropriate. More limitations on accuracy are described at the GPO site.first to properties with unrealized appreciation in proportion to their respective amounts of unrealized appreciation before such increase (but only to the extent of each property’s unrealized appreciation), and first to properties with unrealized depreciation in proportion to their respective amounts of unrealized depreciation before such decrease (but only to the extent of each property’s unrealized depreciation), and For purposes of subsections (a), (b), and (c), a partner who acquired all or a part of his interest by a transfer with respect to which the election provided in section 754 is not in effect, and to whom a distribution of property (other than money) is made with respect to the transferred interest within 2 years after such transfer, may elect, under regulations prescribed by the Secretary, to treat as the adjusted partnership basis of such property the adjusted basis such property would have if the adjustment provided in section 743(b) were in effect with respect to the partnership property.

Although either one of these events is still a “distribution,” they cannot produce dividends to the shareholder as neither of them is considered “from E&P.” Nevertheless, the double-taxation inherent in corporate taxation persists even in these events.

With relatively few specific exceptions, corporations are entitled to the same deductions for business-related expenditures that individual are.

(IRC § 162.) Unlike individuals, however, corporations do not get a personal exemption nor are they entitled to a standard deduction.

This tax liability is an obligation of the corporation for which the corporation’s shareholders generally have no personal liability, but it does nevertheless affect the shareholders inasmuch as that much less wealth accumulates in the corporation than would otherwise accumulate in the absence of the corporate tax.

Once a corporation has computed its taxable income and paid (or accrued) its corporate tax, that income less the tax is accumulated in a balance sheet account called “earnings and profits,” or “E&P.” This is roughly the same figure (but is decidedly ) as what accountants call “retained earnings.” It is, in other words, the earnings of the corporation that have not yet been distributed (they have so far been “retained”).

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