This has been an incredibly educational thread! I'm studying for my tax certification and corporate liquidations have been one of my weakest areas. Reading through everyone's explanations really helped me understand the mechanics. What I found most valuable was learning about the interplay between different code sections. I initially thought Section 311's loss disallowance rule would apply here, but now I understand that Section 336 creates a completely different framework for complete liquidations. The "deemed sale at FMV" concept makes so much sense when you think about it - the corporation is essentially going out of business and disposing of all its assets. The discussion about the 5-year rule under Section 336(d)(2) was also enlightening. It's fascinating how the tax code has these anti-abuse provisions to prevent taxpayers from manufacturing losses through strategic property contributions followed by quick liquidations. For anyone else struggling with these concepts, I'd recommend focusing on identifying the type of transaction first (regular distribution vs. complete liquidation) as that determines which code section applies. Thanks to everyone who shared their knowledge - this community is such a great resource for learning complex tax concepts!

This discussion has been incredibly helpful for understanding corporate liquidation rules! I work in tax compliance and see these issues come up regularly with our corporate clients. One practical tip I'd add: when dealing with liquidation scenarios, always create a timeline of when assets were contributed versus when the liquidation occurs. The 5-year rule under Section 336(d)(2) that was mentioned is crucial for determining loss recognition, and it's easy to miss if you don't map out the dates carefully. Also, for anyone dealing with similar situations in practice, remember that Section 336 applies to ALL property distributed in a complete liquidation - not just the loss property. So in this case, Zenith would also recognize the $180k gain on Greenfield distributed to Brad ($780k FMV - $600k basis). The corporation essentially has a complete "deemed sale" of all assets at fair market value. Thanks to everyone who contributed to this thread - the explanations about why Section 336 overrides Section 311 in complete liquidations really clarified a concept I've struggled with!

I've been dealing with this exact same issue and wanted to share what I learned after consulting with a tax professional. The key insight is that Schedule AI is designed to prevent overpayment of estimated taxes when your income is uneven throughout the year. When you annualize qualified dividends and capital gains using the same factors (4x for Q1, 2.4x for Q2, 1.5x for Q3, 1x for Q4), you're maintaining the correct proportion between ordinary income and preferentially-taxed income. This is crucial because qualified dividends and long-term capital gains are taxed at lower rates (0%, 15%, or 20% depending on your income level). If you don't annualize these amounts properly, you could end up with the wrong tax calculation. For example, if you received most of your dividends in Q4 but don't annualize them in earlier quarters, your Q1-Q3 calculations would show a higher proportion of ordinary income, leading to higher estimated tax requirements. One practical tip: if you're missing quarterly dividend data, most brokerages have this information in your account history online, even if they only mail annual statements. You can also call them directly - they should be able to provide dividend payment dates for tax purposes.

This is exactly the guidance I needed! I'm dealing with a complex situation where I had significant capital gains in Q2 and Q3, plus quarterly dividend payments that vary quite a bit in amount. One thing I'm still unclear on - when using the Qualified Dividends and Capital Gain Tax worksheet for each period on Schedule AI, do I need to recalculate the tax bracket thresholds as well? For example, if I'm annualizing my income by 4x for Q1, do the 0%/15%/20% capital gains tax brackets also get adjusted, or do I use the standard annual thresholds? Also, for anyone else struggling with this, I found that keeping a simple spreadsheet tracking dividend payment dates throughout the year makes the Schedule AI calculations much easier. Most dividend-paying stocks have predictable quarterly payment schedules, so you can even plan ahead for next year's estimated payments. The IRS really should provide clearer examples of how to handle this situation in the instructions. It's such a common scenario for anyone with investment income but the guidance is pretty sparse.

One more thing on this topic - capital loss carryovers can potentially be used on back-to-back separate and joint returns. Like if you filed as single with carryover losses, then got married, you CAN bring those losses to your joint return. But what's weird is if you file jointly with losses, then get divorced, each spouse gets half the carryover. My ex and I had about $18k in carryovers when we split, and we each took $9k to our separate returns.

For the divorce question about splitting capital loss carryovers - yes, this is covered in IRS Publication 504 (Divorced or Separated Individuals). When spouses who filed jointly get divorced, any unused capital loss carryovers from the joint returns are generally allocated 50/50 between the former spouses on their subsequent separate returns, unless they agree to a different allocation in their divorce decree. However, if one spouse can demonstrate they were responsible for a larger portion of the losses (like if they managed all the investments that generated the losses), they might be able to claim a larger share. But absent specific documentation or agreement, the IRS default is 50/50 split. The key thing is to make sure this gets addressed in your divorce settlement so there's no confusion later when you're both trying to claim the carryovers on separate returns.

Random question - if I'm buying equipment for a new business but haven't officially formed the LLC yet, can I still take the Section 179 deduction?

Great question about multiple businesses and Section 179! You're absolutely on the right track thinking about maximizing your deductions. One important consideration I don't see mentioned yet is the taxable income limitation. Section 179 deductions can't exceed your total taxable income from all active businesses combined. Since you're making $675k from your contracting business, you should have plenty of taxable income to support the deductions for both the truck and startup equipment. However, make sure your new startup is genuinely operational before year-end. The IRS looks for legitimate business activity - not just equipment purchases. Having a business plan, marketing materials, or even preliminary client discussions can help demonstrate business intent. Also, consider the timing strategically. If you're close to the Section 179 phase-out threshold (starts at $4.05M in equipment purchases), you might want to spread purchases across tax years. But with your income level, this probably isn't a concern. The key is proper documentation for both businesses and ensuring the equipment is actually placed in service before December 31st.

Has anyone here actually gone through with an S Corp to partnership conversion who can speak to the actual filing process? Our accountant seems unsure about the exact sequence of forms.

Great question about the EIN! You can actually keep the same EIN when converting from S Corp to partnership status - the IRS doesn't require a new one for entity classification changes. The EIN stays with the legal entity (your LLC), not the tax election. For payroll continuity, you'll need to update your payroll processor and notify them of the entity classification change. Any owner-employees who were receiving W-2s as S Corp shareholders will need to transition to receiving partnership distributions and guaranteed payments instead. This means you'll stop withholding payroll taxes for owners and they'll need to start making quarterly estimated tax payments. One thing to watch out for - if you have employees who aren't owners, their payroll treatment stays exactly the same. It's only the owner compensation that changes from wages to partnership income.