This usually has a significant impact on the stock’s price and liquidity.

A corporation will not recognize any gain or loss on a distribution of cash to its shareholders.[13] But if the corporation distributes appreciated property, the corporation must recognize gain as if the property were sold to the shareholder at fair market value.[14] Important Note: These two rules operate as a loss disallowance system.

If the corporation distributes appreciated property, the corporation is taxed on the gain under Code § 311(b).

Instead, the distribution is governed by the general nonrecognition rule of Code § 311(a), which prevent the corporation from recognizing loss on a transfer of depreciated property. § 302(b)(1), this test is usually used only when the safe harbors of I.

Liquidation is a taxable event for both the shareholder and the corporation. Like the “Redemptions Not Equivalent to Dividends” test of I.

So the question is, how do you wind up and liquidate a company that is factually solvent, that is, whose assets exceed its liabilities and which is commercially insolvent?

Do you apply both the Companies Act 71 of 2008 (new Companies Act) and the Companies Act 61 of 1973 (old Companies Act), or do you apply a portion of both?

The Internal Revenue Code uses four tests to make this distinction: To prevent gamesmanship among related parties, Congress has added another layer of rules that must be analyzed to determine if a distribution is a redemption.

These attribution rules provide that shares owned by a shareholder’s parents, children, and grandchildren (but not siblings) are considered to be owned by the shareholder.[11] Similarly, shares held by corporations, trusts, and partnerships are deemed to be owned by their shareholders beneficiaries, and partners, and vice versa.[12] As a result, shares held by these family members and entities are considered to be owned by the shareholder for purposes of determining whether the distribution qualifies as a redemption.

How do you wind up and liquidate a company that is factually solvent?

By Norman M Mzizi The law of insolvency is regulated mainly by the Insolvency Act 24 of 1936, which remains the main source of South African insolvency law.1 The Insolvency Act defines an insolvent as a debtor whose estate is under sequestration and includes such a debtor before the sequestration of his estate, according to the context.2 However, insolvency is not defined in the Act.

In answering these questions, it is necessary first to examine the relevant statutory provisions.