How to liquidate single shareholder C-Corp?

[Zee]

I had a very brief telephone conversation with a client that's supposed to stop at my office Monday monning. He started a C-Corp in 2006, had minimal revenues of about $6,000 and wrote about 10-12 checks for expenses and closed the business. That's about all I know at this time. The potential client is a Columbian immigrant and he was very hard to understand. Also, it didn't sound like he can afford much of a fee. I'd like to help him, but haven't had any experience liquidating a Corporation. Can anyone help me with information on the accounting & tax procedures to be followed? I would assume the income statement would be prepared normally, and the assets would be distributed at FMV.

[ChEAr$]

Liquidation

Just remember, Zee, that a corporation is not "liquidated" until it is formerly
dissolved in accordance with state law.
So prepare the 2006 return, advise client to legally dissolve it.

[OldJack]

Just remember, Zee, that a corporation is not "liquidated" until it is formerly
dissolved in accordance with state law.
So prepare the 2006 return, advise client to legally dissolve it.

I believe that your legally "dissolved" is for purposes of state legal liability from lawsuits and has nothing to do with liquidating for federal income tax purposes. I agree dissolving with the state is important for legal purposes.

For federal tax purposes, the C-corporation should probably file form 966, "Corporate Dissolution or Liquidation" and form 1099DIV for the actual distribution. The ending balance sheet should be zero or liabilities that are left not paid. The distribution is accounted for on page 4, Sch-M2, line 5, of the form 1120.