Bankruptcy

Scenario
A popular retail store has just announced publicly that is filing for bankruptcy. The company has both liquidating and non-liquidating distributions remaining. Some distributions may include inventory from stores, stocks, land plots of locations, etc. The company needs to make decisions regarding these distributions.

This journal will help increase your understanding of non-liquidating and liquidating corporate distributions, and the resulting taxable gains or losses.

Directions
Considering the scenario above, write a 3- to 4-paragraph journal analyzing how interpretation of the tax laws regarding non-liquidating and liquidating distributions affect client financial statements. Think about the readings you have done previously in this module for support.

Specifically, you must address the following rubric criteria:

Explain the tax consequences of non-liquidating distributions. Consider the following in your response:
Effects on the corporation
Effects on the shareholders
Explain the tax consequences of liquidating distributions. Consider the following in your response:
Effects on the corporation
Effects on the shareholders
Determine the tax opportunities for non-liquidating distributions. Consider the following in your response:
Potential for deferral of gain or loss
Determine the tax opportunities for liquidating distributions. Consider the following in your response:
Limiting the corporation’s taxable gain
Order for liquidation,