As of 2010, the federal tax rate for long-term capital gains was 15 percent, a rate favorable to those whose stock increased in value after purchase.

Corporations, however, do not receive such favorable terms when selling assets. Cash paid to shareholders upon liquidation is also taxable.

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If you decide to change to another form of business organization, close your operations permanently or sell your business to another, you will likely need to liquidate the corporation.

Every small business is different, and the tax consequences depend on several factors.

While most publicly traded entities are C corporations (a few are partnerships or trusts), fewer and fewer small businesses operate as C corporations.

That could change over the next several years depending on what happens with individual and corporate tax rates, the tax rate on dividends, company growth plans and nature of the particular business, but I digress.

Generally, a shareholder will want to sell stock while a buyer will want to purchase assets.

Selling stock in a C corporation will yield a capital gain or loss measured by the purchase price less the seller’s basis in stock.

Shareholders might prefer to sell their stock, but buyers might be more interested in the assets.

Sales of stocks produce either a capital loss or gain.

THE IRS SAYS DISTRIBUTIONS of customer-based intangibles to shareholders are taxable.

When a firm or corporation distributes to its shareholders all of its assets, both tangible and intangible, and ceases doing business, the IRS says there is a taxable distribution of its intangible goodwill.

In the ruling, a corporate taxpayer had been incorporated in a state on a particular date, let’s say January 19, 2007.