Why does the IRS and Code allow for an open liquidation, when in fact if the corporation was liquidating, why not wait till final liquidation date and consider liquidated at that time?)
The IRS and Code allow for an open liquidation, when in fact if the corporation was liquidating they don't wait till final liquidation and consider liquidated at that time because A corporate liquidation should be considered at two levels, the shareholder level and the corporate level. In case of shareholder level, a complete liquidation can be thought of as a sale of all outstanding corporate stock held by the shareholders in exchange for all the of the assets in that corporation. Like any sale of stock, the shareholder receives capital gain treatment on the difference between the amount received by the shareholder in the distribution and the cost or other basis of the stock.
In case of corporate level, the corporation recognizes gain or loss on the liquidation in an amount equal to the difference between the fair market value and the adjusted basis of the assets distributed.
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