Tax consequences of liquidating a utma

However, advance planning can often result in better tax results.

Also, it may be possible to structure an asset sale in a way that doesn’t involve a corporate liquidation if that would mean lower taxes.

Corporate-Level Tax Results The sale of assets results in taxable gains and losses for the corporation that must be calculated on an asset-by-asset basis.

Most gains and losses are then reported on an IRS Form, which is filed with the corporation’s Form 1120, U. Corporation Income Tax Return, for the year of sale.

Gifts up to this limit do not reduce the

However, advance planning can often result in better tax results.Also, it may be possible to structure an asset sale in a way that doesn’t involve a corporate liquidation if that would mean lower taxes.Corporate-Level Tax Results The sale of assets results in taxable gains and losses for the corporation that must be calculated on an asset-by-asset basis.Most gains and losses are then reported on an IRS Form, which is filed with the corporation’s Form 1120, U. Corporation Income Tax Return, for the year of sale.Gifts up to this limit do not reduce the $1 million federal gift tax exemption. Parents can set themselves up as the account’s custodian(s), but any money they take from the account can only be used for the benefit of the custodial child.Note that basic “parental obligations,” such as food, clothing, shelter, and medical care cannot be considered as viable expenses to be deducted from the account. Taxes are due—potentially for both you and your child.Any amounts over $1,900 are taxable at either the child’s or the adult’s tax rate, whichever is higher. Once your child reaches the age of trust termination recognized by your state of residence (usually 18 or 21), he or she will have full access to the funds in the account.Note that state income taxes are also due, where applicable. Be warned that your child could have different priorities for the assets in the account than you do. For financial aid purposes, custodial assets are considered the assets of the student.

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However, advance planning can often result in better tax results.

Also, it may be possible to structure an asset sale in a way that doesn’t involve a corporate liquidation if that would mean lower taxes.

Corporate-Level Tax Results The sale of assets results in taxable gains and losses for the corporation that must be calculated on an asset-by-asset basis.

Most gains and losses are then reported on an IRS Form, which is filed with the corporation’s Form 1120, U. Corporation Income Tax Return, for the year of sale.

Gifts up to this limit do not reduce the $1 million federal gift tax exemption. Parents can set themselves up as the account’s custodian(s), but any money they take from the account can only be used for the benefit of the custodial child.

Note that basic “parental obligations,” such as food, clothing, shelter, and medical care cannot be considered as viable expenses to be deducted from the account. Taxes are due—potentially for both you and your child.

million federal gift tax exemption. Parents can set themselves up as the account’s custodian(s), but any money they take from the account can only be used for the benefit of the custodial child.

Note that basic “parental obligations,” such as food, clothing, shelter, and medical care cannot be considered as viable expenses to be deducted from the account. Taxes are due—potentially for both you and your child.

Shareholder-Level Tax Results For federal income tax purposes, each shareholder’s receipt of the liquidating corporate distribution amount is treated as a sale of all the shareholder’s stock in exchange for the distribution.

UTMA accounts allow the donor to gift most security types, including bank deposits, individual securities, and real estate. Parents, grandparents, other relatives, and even non-related adults can contribute any amount to an UGMA/UTMA at any time.

UGMA accounts limit gifts to bank deposits, individual securities, and insurance policies. Note that the federal gift tax exclusion is currently ,000 per year (,000 for married couples). Once you establish an UGMA or UTMA, the assets you gift cannot be retrieved.

But there are many considerations—and consequences—to weigh before opening an account. Which one you use will depend on your state of residence.

Most states—with the exception of Vermont and South Carolina—have phased out UGMA accounts and now only offer UTMA accounts.

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