In the ruling, a corporate taxpayer had been incorporated in a state on a particular date, let’s say January 19, 2007.The company was “administratively dissolved” some time after, for example, effective January 25, 2008, due to its failure to timely pay state franchise taxes.At issue is whether the company’s status as a corporation had been terminated by the administrative dissolution. Something else to consider is that under Section 336(a) of the tax code, a gain or loss is recognized by a liquidating corporation on the distribution of its property in complete liquidation, as if such property were sold to the distributee at its fair market value. 142 ) states that “…where a corporation ceases business operations, has retained no assets, has no income, and has actually liquidated, there is in effect a de facto dissolution, even though the corporation has not been formally dissolved…” In addition, it is entirely possible for the corporation to continue in existence even though it has been, as a matter of state law, dissolved.
The anomaly is corporate dissolution without liquidation.
However, in some cases, complete liquidation need not be accompanied by a formal or legal dissolution of the corporation. Complete liquidation When a corporation is completely liquidated, it transfers all of its assets to its shareholders—whether the assets are cash or property—and the shareholders assume the corporation’s remaining liabilities. According to Section 1.332-2(c) of the tax code, “…legal dissolution is not required…” What’s more, a related revenue rule (Rev. Accordingly, the continuation of existence, after dissolution, may well depend on whether the governing state law provides that a dissolved corporation can still own assets.
The tax treatment of the shareholders is governed by the tax code’s Section 331(a), which provides that amounts distributed in complete liquidation, “shall be treated as in full payment in exchange for the stock.” Generally, stockholders record a gain (usually capital in nature), if the net distributions of the surrendered stock is greater than the shareholder’s adjusted basis in the stock. If state law allows a dissolved company to own assets, the dissolution, unless accompanied by an actual conveyance of the entity’s assets to its shareholders, will not give rise to a liquidation.
For example, to sell your shares at the best market price, you should avoid moving a large number of shares into the market at one time, which will cause the stock price to decline.
In addition, if your shares don't trade frequently or the shares were issued by a private company, get advice about liquidating your portfolio from one or more brokers.