Individuals To file Chapter 7, the debtor files a petition with the local bankruptcy court.
(In some cases, creditors can force a debtor into Chapter 7 by filing the petition themselves.) The debtor must provide the court with financial and tax information, as well as a list of creditors and outstanding debts.
Then, the shareholders are treated as exchanging their stock for the FMV of the assets distributed in complete liquidation, with the resulting gains or losses at the shareholder level.
331 for the difference between the FMV and the shareholder’s basis in the stock).
As a result, the tax consequences of a subsequent sale of the assets by the shareholder should be minimal. The corporation is treated as selling the distributed assets for FMV to its shareholders, with the resulting corporate-level tax consequences.
In the end, if a company's stock or bonds are deemed worthless by the bankruptcy court, investors might be able to deduct their losses on their tax returns.
Source: Investing Answers is most often used in discussions about Chapter 7 bankruptcy -- a section of U. bankruptcy law under which companies and individuals liquidate their assets in order to repay their debts.
331 when they receive the liquidation proceeds in exchange for their stock.
If the corporation distributes its assets for later sale by the shareholders, the assets generally “come out” of the corporation with a basis equal to FMV (and with the related recognition of gain or loss under Sec.Most companies do not file Chapter 7 until they've been unsuccessful with a Chapter 11 filing, which lets them attempt to restructure the company and restore the ability to service debt.In Chapter 7, a company ceases operations, and the appointed trustee liquidates the company's assets in order to repay its debts.In most cases, the court also requires proof that the individual has obtained credit counseling. trustee (or the court itself, in some states) then appoints an impartial trustee to handle the case and liquidate the debtor's assets.Filing the Chapter 7 petition automatically stops most collection actions against the debtor, including lawsuits, garnishments, and phone calls. If all the debtor's assets are exempt or subject to liens, there may not be any assets to liquidate and hence no money to distribute to creditors.These example sentences are selected automatically from various online news sources to reflect current usage of the word 'liquidate.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. What It Is In the financial world, to liquidate something means to sell it for cash.