S corporations generally recognize gain or loss on each asset they distribute in liquidation.

Question

Quizplus · Accepted Answer

S corporations are pass-through entities, which means they do not pay tax at the entity level. Instead, the gains and losses are passed through to the shareholders to report on their individual tax returns. When an S corporation liquidates, it must recognize gain or loss on each asset it distributes to the shareholders. This gain or loss is then allocated to the shareholders based on their percentage of ownership in the company.

S Corporations Generally Recognize Gain or Loss on Each Asset