1120S

[TAXMAN]

I may be lost. TP single shareholder in 1120S. In 1980 tp put in 10k for stock to start business. In 2009 corp sold the goodwill (all equipment gone)

for 40K. Corp prepared return showing sale and passed out gain to tp. TP paid the tax on this gain all 40k. Corp now out of business. Question is:

What do I do with the 10k he originally put in. Corp showed profit on its returns for all tax years and TP included these on his returns. Tp never took out in cash what he didn,t pay tax on. From the returns there was a lot less cash available than there was taxable income due to various liabilities during the years.

Thanks to anyone who can help.

Edited September 13, 2010 by TAXMAN

[OldJack]

Yes, your post indicates you are lost. Remember this is a corporation and not a partnership even though many partnership rules apply on determining taxable income. The stock investment amount is part of the shareholders tax basis in liquidation of the corporation. You have been keeping track of the shareholders tax basis have you not? You do have a balance sheet with numbers do you not? Your client is planning to liquidate the corporation with final distribution and final information reporting is he not?