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Disposal of assets (C-corp, Form 1120 Schedule K line 17)

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June 26, 2020
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"During or subsequent to this tax year, but before the filing of this return, did the corporation dispose of more than 65% (by value) of its assets in a taxable, non-taxable, or tax deferred transaction?"

I am wondering what constitutes the "disposal" as mentioned above by the IRS. If my C-corporation has performed a liquidation/nondividend distribution to return back all investor capital and profits would this qualify as a "disposal of assets"?

Or does "assets" only mean stock/shares? Currently my C-corp has $0 in remaining cash/assets.

https://www.irs.gov/pub/irs-pdf/f1120.pdf

Not A Product Question

Best answer by DavidS127

Yes, cash is an asset of the corporation, but distributing that cash to shareholders isn't a disposal.

DavidS127

Assets in this context are things the corporation owned, typically investments, land, buildings, land improvements, buildings, equipment, etc. Your stock in the C corp is not an asset of the corporation.

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ineedtaxhelp2020Author

Hi @DavidS127 so would the corporation's cash funds count as "assets" in this case?

DavidS127Answer

Yes, cash is an asset of the corporation, but distributing that cash to shareholders isn't a disposal.

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foaiman

Related question for @DavidS127 : I have a C-Corp owned by my self directed IRA. If I transfer an asset (share in Limited Partnership) from the C-Corp to the parent IRA, and it is worth more than 65% of the total value of the C-Corp, what are the tax implications I need to worry about? If I say Yes to #17 in Form 1120, what are the ramifications?

Is a transfer of the LP share to the parent (100%) stock holder, considered disposing of the asset?

Please note the entity getting the asset is a tax-deferred entity (IRA).

Thank you.