Legal Question in Real Estate Law in California

Re: Taxes after a Corporate Dissolution

Mike, co-counsel is correct. Dissolving a corp is not that easy. What type of corp is it? How many shareholders? Did you do a resolution to sell the property?

There are many ways to deal wth your situation and I think our office can be of assistance. If you're in So Cal, I can be reached at the info provided by LawGuru or through one of our firm's websites such as No-Probate.com

Namaste,

Scott

Re: Taxes after a Corporate Dissolution

Mike, it isn't that simple. Dissolving a corporation isn't a matter of snapping your fingers, presto-changeo, one moment it's here, the next minute it's forgotten.

Shutting down a corporation is a multi-step process, and terminating the "official" existence by filing a certificate of dissolution with the Secretary of State is only a part of the process.

A corporation cannot be dissolved voluntarily until its business is completely wound up. See Corporations Code section 1905. Complete winding up of the business of a corporation requires (a) that known debts and liabilities have been paid or adequately provided for as far as the assets permitted, and (b) that the known assets have been distributed to the persons entitled thereto. The corporation must also file or certify that it will when due file a closing tax return.

This means the corporation CANNOT be dissolved while it still owns real estate, or for that matter, any other kind of property. Therefore, the corporation MUST transfer the land to someone, preferably the persons entitled to it, or must sell it and distribute the net cash realized, before it can dissolve. The process you describe would not stand up to tax-audit scrutiny.

If you wanted to avoid double taxation, this should have been set up as an "S" corporation or an LLC.

I suggest consulting a tax specialist (CPA or attorney) to see what is best to do in the circumstances. It may be that there is a way around the double taxation problem, or to reduce its bite, such as a 1031 exchange.

Re: Taxes after a Corporate Dissolution

Dear Mike:

As Mr. Whipple has pointed out, the lawmakers in Sacramento are way ahead in anticpating such matters. Since I do not dabble in the area of taxation, or tax law, you should consult an expert in the tax field, either a tax lawyer, or C.P.A., again following Mr. Whipple's solution.