What are the tax consequences for liquidating a corproation
Simply converting or merging the S corporation into an LLC taxed as a partnership is not satisfactory, because that transaction would trigger the taxable liquidation of the S corporation.
One method to convert to a tax partnership tax-free, without undergoing an inversion, is the “LLC drop-down,” which entails the S corporation forming a wholly-owned LLC, that is initially a disregarded entity for tax purposes, and transferring all of the S corporation’s assets and business to the new LLC.
When you sell shares from a tax-exempt fund, you still can face federal and state capital-gains taxes, in states that levy an income tax.
The amount you pay at the time of liquidation can depend on the lifetime performance of the investment, your tax bracket or both.
Capital gains and sales remain within the the tax-deferred account and do not face taxation until you start making withdrawals.
The short-term and long-term taxes you pay when liquidating your shares of a fund can depend on the type of fund in which you invest.For this reason, the tax you pay when liquidating shares can depend on how long you hold your investment.