Carefully review your options before making a decision

When it come time to sell your corporation, you have two options. You can either sell the corporation stock or have the corporation sell the assets and distribute the proceeds. The tax implications of the two sales are very different. If you choose to sell the stock, you are the seller. The corporation is not affected by the transaction. The new owner steps into your shoes as the shareholder and takes over the existing corporation. If your share of the proceeds exceeds your basis in the stock, you'll have a capital gain to report on Schedule D.

If the corporation sells its assets, the corporation may close its doors. The assets could be sold to one person who intends to operate a business similar to yours, but does not want your corporation. The corporation return will reflect the sale of the assets. When the corporation liquidates, your share of the cash will be reported on Form 1099-DIV as a liquidating distribution. You'll use Form 1099-DIV to report the sale of your stock on Schedule D. Selling assets of the corporation could result in double taxation. The sale of the assets is taxable to the corporation and the liquidating distribution is taxable to the shareholder.

If you are selling the corporation stock for a loss, you may qualify for special tax treatment. It's a good idea to review the tax consequences of the sale with your tax advisor before making a move.

Tax Tips Small Business

  • Bartering and trading? Each transaction is taxable to both parties

    Sometimes, when the right opportunity presents itself, you may be able to pay for goods and services that you need or want by trading goods that you own, or providing a service that you can perform in return. An example of this is if you own a lawn maintenance company and receive legal services from an attorney and pay for those services by providing an agreed upon amount of mowing and maintenance services at the attorney's home or place of business.

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Small Business Quick Tip

  • Personal Assets to a Business

    If you have contributed personal assets, such as a computer or vehicle to your business, the lower of the fair market value or your cost basis of these assets qualifies as a business deduction, subject to depreciation limitations, beginning with the date of conversion.
Friday, 22nd February 2019
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Tax Tips Personal

  • Is an Inheritance Taxable?

    In most cases, an inheritance is not taxable to you, but there are exceptions

    At some point, you may inherit money or property that, in most cases, is not taxable to you. Life insurance proceeds are included in the deceased person's estate, but are not taxable to the beneficiaries. Bank accounts and other income-producing assets such as stocks are not taxable to you when received, but the income these assets generate is taxable to you.

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Personal Quick Tip

  • Tuition Deduction

    If you paid qualifying tuition and related expenses in 2016, you may be able to deduct up to $4,000 of the costs or qualify for a tax credit.