Lesson 8A-Objectives

After completing this lesson, students should be able to:

1.   State when a corporation will be said to be in a "state of liquidation," and the importance of having an intention to liquidate be evidenced by some formal corporate action.

2.  Describe the tax consequences of a liquidation under section 331 to the distributing corporation, including gain or loss recognized by the corporation, and the effect of the liquidation on the corporation's earnings and profits account.

3.  Describe how the corporation's gain or loss on liquidation may be affected by such tax principles as the assignment of income doctrine, the tax benefit rule, the proper matching of revenue and expenses, and the matching of prepaid expenses with the time period to which they relate.

4.  Describe the consequences to corporate shareholders of receiving a distribution in complete liquidation.

5. Understand how a shareholder's liquidation gain or loss might be affected by the receipt in a liquidating distribution of assets that cannot be valued with reasonable accuracy ("open" liquidations).