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The collection of assets belonging to a debtor to be applied to the discharge of his or her outstanding debts.

A type of proceeding pursuant to federal Bankruptcy law by which certain property of a debtor is taken into custody by a trustee to be sold, the proceeds to be distributed to the debtor's creditors in satisfaction of their claims.

The settlement of the financial affairs of a business or individual through the sale of all assets and the distribution of the proceeds to creditors, heirs, or other parties with a legal claim.

The liquidation of a corporation is not the same as its dissolution (the termination of its existence as a legal entity). Depending upon statute, liquidation can precede or follow dissolution.

When a corporation undergoes liquidation, the money received by stockholders in lieu of their stock is usually treated as a sale or exchange of the stock resulting in its treatment as a capital gain or loss for Income Tax purposes.

See: aberemurder, assassination, cancellation, composition, discharge, dispatch, dissolution, homicide, killing, murder, payment, termination


the procedure under which a company is dissolved (or wound up). Liquidation maybe voluntary (where the company is solvent but where the purposes for which it was set up have been achieved or no longer exist) or compulsory (usually where the company is insolvent). The function of a liquidator is to convert the assets of the company into cash, which is then distributed among the creditors to pay off (so far as possible) the debts of the company. Any surplus is then distributed among the members.

LIQUIDATION. A fixed and determinate valuation of things which before were uncertain.

References in periodicals archive ?
Unfortunately, the IRS eschewed the certainty of Letter Ruling 200250024 and backslid into the ambiguity of Letter Ruling 200028027, by failing to indicate whether the merger would be respected as a liquidation or viewed as an upstream reorganization via Rev.
Apparently, the IRS concluded that (1) the new class A stock's right to participate in 20% (or on a 1:4 ratio with the new class B stock) of the "upside" of the company was participating in corporate growth significantly; and (2) the fact that the class A stock had limited rights to liquidation proceeds was inconsequential, because the likelihood of liquidation was remote.
If, however, as part of the same plan, A makes a check-the-box election to be treated as a disregarded entity (resulting in a deemed liquidation of A into B), the transaction would be treated as if A had transferred its assets to B in exchange for additional B shares, which were then distributed to P in the liquidation of A.
On audit, failing to recognize that a liquidation was in progress, the IRS attempted to treat the entire distribution, including the taxpayers' return of capital, as ordinary income under Sec.
The deemed asset sale (to the extent of the shareholder's pro rata gain allocation, if any) and the deemed liquidation (to the extent of the deemed liquidation proceeds in excess of outside shareholder stock basis) can both result in current taxable income.