S Corporation

Goldfish partnership has 3 partners, Susan, Tina, and Vivian. Each partner has a basis in her partnership interest of $200,000. In the current year, Susan receives a liquidating distribution including $60,000 in cash and $120,000 in unrealized receivables. Susan takes a zero basis in the unrealized receivables. Will Susan recognize a capital loss on this liquidation and if so, what is the amount? Explain the tax treatment in language a non-accountant business person would understand.

No hard coding of solutions. 

Submission Requirements

Be      sure to discuss and reference concepts taken from the assigned textbook      reading and relevant research.

Support      your paper with at least 4-6 tax, scholarly, legislative, or court      references (of which the textbook may be one). Your paper should be 5      pages in length and conform to Strict APA format.

Include at least four scholarly references in addition to the course textbook. 

Chapters 21 & 22 in South-Western Federal Taxation 2019

Recognition and Character of Gain or Loss on Sale or Exchange, 26 U.S. Code § 741

Unrealized Receivables and Inventory Items, 26 U.S. Code § 751

Tax Imposed on Certain Built-in Gains, 26 U.S. Code § 1374

Lenok, D. (2017). How cold assets can help keep others hot. Wealth Management.

Luscombe, M. A. (2018). Tax trends: Passthrough entities and tax reform. Taxes, 96(2), 3-4

Certain stock purchases treated as asset acquisitions, 26 U.S. Code § 338 (n.d.). Retrieved from Thomson Reuters Checkpoint database.

Deduction and recapture of certain mining explorations expenditures, 26 U.S. Code § 617 (n.d.). Retrieved from Thomson Reuters Checkpoint database.

Definitions and special Rules, 26 U.S. Code § 1283 (n.d.). Retrieved from Thomson Reuters Checkpoint database.

Disposition gain representing accrued market discount treated as ordinary income, 26 U.S. Code § 1276 (n.d.). Retrieved from Thomson Reuters Checkpoint database.

Effect of election on corporation, 26 U.S. Code § 1363 (n.d.). Retrieved from Thomson Reuters Checkpoint database.

Election; revocation; termination, 26 U.S. Code § 1362 (n.d.). Retrieved from Thomson Reuters Checkpoint database.

Elections and contests, 26 CFR § 1.1362-6 (n.d.). Retrieved from Thomson Reuters Checkpoint database.

Extent of recognition of gain or loss on distribution, 26 U.S. Code § 731 (n.d.). Retrieved from Thomson Reuters Checkpoint database.

Gain from certain sales or exchanges of stock in certain foreign corporations, 26 U.S. Code § 1248 (n.d.). Retrieved from Thomson Reuters Checkpoint database.

Gain from dispositions of certain depreciable property, 26 U.S. Code § 1245 (n.d.). Retrieved from Thomson Reuters Checkpoint database.

Gain from dispositions of certain depreciable realty, 26 U.S. Code § 1250 (n.d.). Retrieved from Thomson Reuters Checkpoint database.

Gain from disposition of farm land, 26 U.S. Code § 1252 (n.d.). Retrieved from Thomson Reuters Checkpoint database.

Gain from disposition of interest in oil, gas, geothermal, or other mineral properties, 26 U.S. Code § 1254 (n.d.). Retrieved from Thomson Reuters Checkpoint database.

Partner’s distributive share, 26 U.S. Code § 704 (n.d.). Retrieved from Thomson Reuters Checkpoint database.

Partner’s share of nonrecourse liabilities, 26 CFR § 1.752-3 (n.d.). Retrieved from Thomson Reuters Checkpoint database.

Recognition of precontribution gain in case of certain distributions to contributing partner, 26 U.S. Code § 737 (n.d.). Retrieved from Thomson Reuters Checkpoint database.

S corporation defined, 26 U.S. Code § 1361 (n.d.). Retrieved from Thomson Reuters Checkpoint database.

Special rule, 26 CFR § 1.752-4 (n.d.). Retrieved from Thomson Reuters Checkpoint database.

Taxation of DISC income to shareholders, 26 U.S. Code § 995 (n.d.). Retrieved from Thomson Reuters Checkpoint database.

Tax imposed on certain built-in gains, 26 U.S. Code § 1374 (n.d.). Retrieved from Thomson Reuters Checkpoint database.

Transfers of franchises, trademarks, and trade names, 26 U.S. Code § 1253 (n.d.). Retrieved from Thomson Reuters Checkpoint database.

Treatment of partnership liabilities, 26 CFR §1.752-1 (n.d.). Retrieved from Thomson Reuters Checkpoint database.

Unrealized receivables and inventory items, 26 U.S. Code § 751 (n.d.). Retrieved from Thomson Reuters Checkpoint database.