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Unit 11: Tax Planning for Liquidation
          Manpreet Kaur, Lovely Professional University



                         Unit 11: Tax Planning for Liquidation                                  Notes


             CONTENTS

             Objectives
             Introduction
             11.1  Concept of Liquidation
                 11.1.1 Definition of Complete Liquidation

                 11.1.2  When is it Appropriate to Seek Liquidation of a Company?
                 11.1.3  Procedure for Liquidation
             11.2  Tax Considerations in Liquidations
                 11.2.1  Affect of Appointment
                 11.2.2  Cessation of Trade
                 11.2.3  Income Tax Treatment upon Enterprise Liquidation
                 11.2.4  Tax Consequences of Liquidating a Subsidiary
             11.3  Liquidating a corporation: How to Structure a Plan of Liquidation to Avoid
                 Unanticipated Tax Liabilities?
                 11.3.1  Distribution of Assets
                 11.3.2  Concerns of the Liquidating Corporation
                 11.3.3  Tax Treatment to the Shareholder
             11.4  Tax Implications of Liquidating a Company
             11.5 Summary
             11.6 Keywords
             11.7 Review Questions

             11.8 Further Readings

          Objectives

          After studying this unit, you will be able to:
               Discuss the concept of liquidation

               Describe tax considerations in liquidations
               Explain liquidating a corporation
               Elucidate tax implications of liquidating a company

          Introduction

          When companies go into liquidation, they need to do with the corporate Income Tax problems
          related to liquidation income, liquidation income tax and dividend distribution. Liquidation

          typically involves an adoption of a plan of liquidation, necessary local law notifications to various
          interested parties, winding down of business operations, distributions of assets, and the eventual
          dissolution of the corporate law shell. Sections 332 and 337 generally govern liquidations of
          solvent, 80 percent (vote and value) controlled subsidiaries into their corporate shareholder.
          These rules are widely understood to allow a tax-free transaction in which neither the corporate



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