CathysTaxes wrote:If the CPA had booked a distribution to the shareholder for the FMV of the equipment, wouldn't the gain on the 'sale' reduce the loss?
Are you being engaged to amend the corporate income tax return for the dissolved corporation to include a gain on the property distribution so that there can be a balance due that the corporation can't afford to pay? That kind of seems like a waste of time.
CathysTaxes wrote:If the assets were distributed as a basis of zero
No. Steve is correct, the shareholder's basis in the distributed equipment is FMV. The corporation has a gain, but see my comment above on that, and whether or not the corporation does what it's supposed to do doesn't affect the shareholder having basis equal to FMV.
CathysTaxes wrote:2021 would have a short term capital loss due to Loans to Shareholders
I would have guessed that her holding period in the stock and the loan was more than 1 year, making it long-term. Or maybe she qualifies for it to be an ordinary loss under Sec. 1244.
CathysTaxes wrote:and 2022 have a short term capital gain?
Or more likely a short-term capital loss on the sale of the equipment, because I think probably the FMV of the equipment went down, not up, between 2021 and 2022. Or it kind of sounds like she's still using that equipment in some sort of business in 2022 perhaps? I wasn't clear on that. So maybe selling equipment used in business in 2022 would be an ordinary loss on Form 4797.