Liquidating real

The shareholder’s basis is decreased (but not below zero) by the shareholder’s share of the S corporation’s items of loss and deduction, nondeductible expenses (except expenses that are not chargeable to the capital account), depletion deduction for oil and gas property, and distributions to the shareholder that are not made from accumulated earnings and profits.This helps ensure that the shareholder only benefits once from reductions in income earned by the S corporation.

While moving the inventory is one goal, it's not the primary goal. Since "liquidation sales" usually last several months -- Circuit City's will last till the end of March -- there is no incentive to slash prices from the outset.Because the income of S corporations is taxed to the owners when the income is earned, a mechanism is needed to ensure that the shareholder is not taxed again when the earnings are distributed.This is done through a system of rules that track and adjust the shareholder’s stock basis.In fact, most liquidators will actually raise prices to full retail or a token 10% off because they know the store will be packed with people.That means prices at liquidation sales are often higher than you could have gotten at the store before it went into bankruptcy.

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