Liquidating an S-corp

[dsi]

Would anyone dare to help me with liquidating my s-corp client?

Assets:
Cash in Bank $ 5176
A/R 69,684
Total Assets $74,860

Liabilities & Stockholders Equity

Note Payable $185, 303
Loan from Stockholder 10, 162

Capital Stock 10,000
AAA <130,606>
Total Lia & Stockholders Equity $74, 860


What are the journal entries I need to make?

What else do I need to do? know?


Thanks,
Dave

[Maribeth]

Dave, who is the lender on the note payable. Are the accounts receivable all trade receivables? Is the corporation on a cash or accrual basis?

Maribeth

[dsi]

The note is a line of credit owed to the bank, however the shareholder is personally liable for this debt. This is a new client for me, and I just discovered this. S-corp, cash basis. The A/R turns out to be an installment note receivable.

[dsi]

No takers on this one? I thought it would be a no brainer for a couple of you with a good deal of experience withs-corps. Maybe a good topic to include in TTB? That is, a simple example of how to liquidate an s-corp, followed up with how to report it on the 1120S and the related 1040.

[Uncle Sam]

Liquidating S Corp

First - you're off $ 1.

You really can't close out the corporation until the installment Note Receivable has been fully collected - or - the client has it discounted to a factor

If the shareholder is personally liable for the line of credit and intends to personally pay off the balance after the corporation pays what it can (I assume after all A/R has been collected), then actually whatever the corporation doesn't pay, can be credited to the Shareholder Loan Payable to wipe out the Note Payable balance.

So the A/R collected would be used to reduce the Line of Credit.
The balance of the Line of Credit would increase the Shareholder Loan Payable.
The remaining balance of the Shareholder Loan + Cap Stock minus AAA would be a long term capital loss to show on shareholder's 1040.

[dsi]

Thanks so very much Uncle Sam, this gives me enough direction to move forward.

[kthurman]

Installment Sale Upon Liquidation

First - you're off $ 1.

You really can't close out the corporation until the installment Note Receivable has been fully collected - or - the client has it discounted to a factor

My recollection is that an installment note which is distributed is accelerated at the entity level. You may want to confirm this.