Free alternative lifestye hookups - Liquidating s corp

THE IRS SAYS DISTRIBUTIONS of customer-based intangibles to shareholders are taxable.

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In the cases discussed in this article, the Tax Court did not distinguish between personal service corporations, such as CPA firms, and commercial organizations, such as an ice cream distribution company, in identifying the individual ownership of customer-based intangibles.

In planning for a liquidation of their professional practice or advising clients about the liquidation of a commercial organization, CPAs will find that the problems and the solutions are likely to be the same.

WHETHER PLANNING FOR A LIQUIDATION of their own professional practices or advising clients about the liquidation of a commercial organization, CPAs will find that the problems and the solutions associated with each are likely to be the same.

awyers advise CPAs to have employment and noncompete agreements in their accounting practices.

In a professional practice, tangible property such as office equipment, furniture and fixtures makes up a small portion of a firm’s total value.

By far the largest element of value in a profitable professional practice is the intangible .The shareholder, who treats the fair market value of the property as received in exchange for his or her stock, also recognizes a gain (IRC section 331(a)).The critical issue for tax planning is whether the assets distributed are considered property under IRC section 336 and whether the corporation owns them.The question of who “owns” the client relationships and customer-based intangibles turns on whether an employment or noncompete agreement is in effect at the time of the distribution.The Tax Court has held that in the absence of an effective employment or noncompete agreement at the time of liquidation distributing customer-based intangibles to the shareholders is not a taxable event to either the corporation or to the individuals ( In Real Life, Sometimes the Good Guys Win Consider the case of William Norwalk and Robert De Marta when they liquidated their Fremont, California, CPA firm and traded the equipment, office furniture and their client list to a large regional firm in exchange for a partnership interest.The IRS determined their firm had realized a 8,000 gain on liquidation of its goodwill and Norwalk and De Marta, as shareholder partners, realized capital gains from the distribution of the goodwill.

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