Taxpayer owns a LLC taxed as c corp. He decides to close the business. He has retained earnings on balance sheet and cash leftover. Can anyone help answer the following questions?
1. Is liquidating the business and distributing the cash to himself the best way tax-wise?
2. If the company has earnings and profits, will that impact the tax treatment of liquidating distribution?
My understanding is that On shareholder level, capital gain/loss needs to be recognized by subtracting stock's basis from cash received.
My confusion is that if there is earnings and profits remaining, will that cause some of the cash distribution be treated as dividend to shareholder?
3. Is stock always treated as capital asset?
4. Is the tax treatment of c corp liquidation the same whether it is a corporation or llc taxed as c corp.?
5. Also, the dissolution date for tax purpose is not the same as the date business dissolution procedures are finished on state level, right?
Thank you!