S Corp (Prior C Corp) Closing

Technical topics regarding tax preparation.
#1
FLAcct  
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21-Apr-2014 2:47pm
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Florida
I am trying to figure out how to handle the closing for my client's S Corp. Briefly here goes:

In 2017 the S Corp sold its inventory for $350,000 and then closed it's business. There is a note that documents this amount. The S Corp received monthly payments until Nov 2018 and none since then. My client doesn't think they will ever receive another penny on this note. We are not sure yet when there will be enough evidence to claim a business bad debt deduction, but for now let's say it is 2019.

At the end of 2019 they would have distributed all cash as distributions to the extent of AAA and then dividends from Accum E&P for the excess. Their balance sheet after these distributions/dividends would look like this:

$5,000 Capital Stock
$195,000 Accum E&P
$200,000 Current Loss (from bad debt deduction)

What entries would have to be made in order to close the corporation? Does the Current Loss just get absorbed into the Capital Stock and Accum E&P to zero out? Is it that simple? Or do I have to record $195,000 in dividends (and issue a 1099-Div to the stockholder) and somehow deduct the $200,000 loss?

Thanks for your help.
 

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