Small C Corporation is liquidating. 2 shareholders. Balance sheet has $200,000 cash on the asset side; Capital Stock of $50,000 and Retained earnings of $150,000 on the liability side. Other assets were all sold and Corp paid the appropriate taxes on the gains.
Shareholders split the $200,000 and liquidate. What happens to the retained earnings?
I see $75,000 gain to each shareholder ($100,000 cash - $25,000 cap stock). I've simplified a little, and assume the basis in their stock is equal to the $50,000 in that account. I wasn't there in the beginning and don't see how it could be different considering it's a C Corp and always has been.
There should be no dividend income because it's a complete liquidation; but again what happens to the Retained Earnings ?
Thanks