So one of my small S corps sold off all of it's assets prior to liquidation.
The transaction is similar to an example of a 453B(h) transaction I was looking at because immediately after the sale of all the assets, S Corp dissolved and distributed in complete liquidation the note receivable to the shareholders.
The sale price consisted of cash, the note receivable, and debt relief in the way of buyer assuming an unpaid royalty & assumed a couple of loans on two vans used in the business, which were some of the assets purchase.
453B apportions to the shareholders stock basis (increased by the gain from the sale) the down payment in yr of sale, a percentage, and the note to a percentage of basis subsequent to yr of sale.
My question is - is the "debt relief" seller got as part of the down payment, and helped generate ordinary income from recapture on some of the assets, also considered part of the liquidating distribution along with the cash and note. It almost seems as if that is counting the debt relief twice. Obviously the shareholders "got" the cash and the note, but the debt relief, again ?