C Corp sold all assets for $500,000 plus took a note receivable of $1,000,000 (payable 200,000/yr for 5 yrs)
Corp dissolves under Sec 331 liquidating distribution.
Shareholders adjusted basis in stock is $400,000 total gain s/b = 1,100,000 (1,500,000 - 400,000)
Shareholder does not elect out of installment method under 453(h) (ie wants to report gain on sale of stock using the installment method - the payments on the note as received)
500,000 cash = 33%
1,000,000 note = 67%
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1,500,000 total sale price
Is my allocation 33% to the cash part of the distribution making the gain on it $368,000 in the first year
( $500,000 - ( .33 X 400,000)) ?
And $200,000 - (( 400,000 X .67)/5) of installment payments rec'd = 146,400 ?
Assuming the first payment of 200,000 of the note also received in the same year of the 500,000 cash liquidating distribution then the LTCG would be 514,000 (368,000 + 146,000).
514,400 yr 1
146,400
146,400
146,400
146,400 yr 5
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1,100,000 total gain
Is that how a note received in a 331 liquidation is allocated ??
Thanks