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Dissolving an S-Corp?

DWH2021
Level 1

I have an 1120S client that is dissolving the S-Corp. All that is left on S-Corp’s balance sheet is Cash in the bank, common stock and retained earnings.  It is a husband wife ownership 50% each.  If I distribute the cash from the bank account to the two owners, which have enough basis in there capital accounts to cover the distribution, would this be tax free?  Or, should the distributions be treated as Capital long-term gains?

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IRonMaN
Level 15

Based of the facts presented - tax free


Slava Ukraini!

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2 Comments 2
IRonMaN
Level 15

Based of the facts presented - tax free


Slava Ukraini!
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dascpa
Level 11

Assuming no other issues out there, this is not a capital gain.  Debit Equity, Credit Cash.  It's a just return of equity at no gain or loss.

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