Corporate Exit Transactions: Asset Sales, Stock Sales, and Liquidations

Categories: IRS ORL FL
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About Course

This course is a practice-focused, four-module program on the three ways a C corporation and its owners actually exit a business: a taxable sale of the corporation’s assets, a taxable sale of the corporation’s stock, and a corporate liquidation. It goes beyond a general overview of gain and loss recognition to build the practical skills a preparer needs at the desk: allocating a purchase price among asset classes under the residual method, determining when a stock sale can be recharacterized as an asset sale through a Section 338 or Section 336(e) election, applying the general recognition rule for a liquidating corporation alongside the nonrecognition exception for an 80%-or-more-owned subsidiary, and advising a client on how the choice between these structures shifts the actual tax cost between buyer and seller.

This course assumes general familiarity with C corporation taxation and individual federal income tax preparation. Course content is grounded in IRC Sections 336, 337, 338, 331, 332, 334, 453, and 1060; the current Instructions for Form 8594 and Form 8883; and current Treasury regulations under those sections. Where a transaction structure changes which party bears the tax cost — a single level of tax versus a corporate-level tax layered on top of a shareholder-level tax — the course states the distinction explicitly rather than treating every exit transaction as economically interchangeable.

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What Will You Learn?

  • Determine the tax consequences of a taxable asset sale to both the selling corporation and the buyer, correctly allocate the purchase price among asset classes under the Section 1060 residual method, and identify the character of the resulting gain or loss, including depreciation recapture under Sections 1245 and 1250.
  • Determine the tax consequences of a taxable stock sale to the selling shareholders, and identify when a Section 338(g), Section 338(h)(10), or Section 336(e) election is available to recharacterize the stock sale as a deemed asset sale for tax purposes, including which party makes each election and the different tax-cost consequences of each.
  • Apply the general rule that a liquidating corporation recognizes gain or loss on distributed property under Section 336, and the shareholder-level capital gain or loss treatment under Section 331, including the loss-limitation rules that apply to related-party and contributed-property distributions under Section 336(d).
  • Apply the Section 332 nonrecognition exception for a liquidating subsidiary at least 80% owned by its parent corporation, the parallel Section 337 nonrecognition rule for the subsidiary itself, and the resulting carryover basis to the parent under Section 334(b).
  • Advise a client on the practical tradeoffs between an asset sale, a stock sale, and a corporate liquidation from both the buyer's and the seller's perspective, including the role of installment reporting under Section 453 and the return and disclosure requirements that attach to each transaction type.

Course Content

Module 1 — Taxable Asset Sales: Purchase Price Allocation, Character, and Recapture
This module works through a taxable sale of a C corporation's assets from the ground up: the §1001 gain-or-loss mechanics that apply to every asset sold, the §1060 residual method for allocating a lump-sum purchase price among seven asset classes, and the §1245 and §1250 recapture rules — including how acquired, amortizable §197 goodwill is itself §1245 property. You will learn the correct order of analysis: recapture first, then §1231 netting subject to its own five-year lookback, and why a selling C corporation's own tax rate never depends on the individual-level rate for unrecaptured §1250 gain.

  • Taxable Asset Sales: Purchase Price Allocation, Character, and Recapture

Module 2 — Taxable Stock Sales and the Section 338 and Section 336(e) Elections
Building on Module 1's asset-sale mechanics, this module turns to a taxable sale of stock and the three elections that can recharacterize it as a deemed asset sale for tax purposes. You will learn who makes each election and what each requires — the unilateral, buyer-only §338(g) election and its typical two-layer tax cost; the joint §338(h)(10) election, available only for an S corporation or an 80%-owned group member; and the broader §336(e) election, which needs its own written agreement between seller and target but no corporate buyer at all.

Module 3 — Corporate Liquidations: The General Rule and the Section 332/337 Subsidiary Exception
This module addresses what happens when a corporation liquidates rather than sells: the general rule under §331 and §336(a), the loss limitations under §336(d), and the §332/§337 exception that shields a qualifying 80%-or-more parent and its liquidating subsidiary from recognizing gain — while any minority shareholders remain fully taxable under the general rule. You will also learn the carryover basis rule under §334(b)(1) that applies to a qualifying parent's share of the distributed property.

Module 4 — Structuring the Exit: Buyer/Seller Tradeoffs, Installment Sales, and Practitioner Compliance
The final module steps back to compare the buyer's and seller's actual tax cost across all three exit structures covered in the course, then adds two practical layers: the §453 installment method — including the recapture-first rule, the dealer-property and publicly-traded-securities exclusions, and the related-party acceleration trap — and the compliance and disclosure requirements, including Forms 8594, 8883, and 966, that attach to each transaction type.

Final Assessment – Corporate Exit Transactions: Asset Sales, Stock Sales, and Liquidations
You have completed a comprehensive review of the topics presented throughout this course and are now prepared to demonstrate your understanding of the key concepts. The following final examination assesses your knowledge of the material covered in all four modules. A passing score of 70% is required to successfully complete the course.

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