Abstract The article focuses on basic procedures under which a corporation may liquidate. One procedure, which is not a plan for tax purposes, is to let the corporation convert all assets to cash and then distribute the cash to the shareholders. In the absence of tax planning, the corporation would have to pay a tax on gains resulting from liquidation of the assets, and the stockholders would have a tax to pay on the gain resulting from the redemption of their stock. Another procedure, which permits the postponement of taxes, is to elect to follow the conditions outlined in Section 333 of the U.S. Internal Revenue Code. The benefits of this section are available only if elected by stockholders who at the time of the adoption of the plan of liquidation own at least 80 per cent of the total combined voting power of all classes of voting stock. The provisions of Section 337 of the Internal Revenue Code outline another procedure which may be followed in corporate liquidations. If these provisions are followed, there is no postponement of taxes, but double taxation is avoided.
James H. McLean (Thu,) studied this question.