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When you assume corporate liabilities or receive property with an outstanding debt balance, you reduce the gross proceeds by the total amount of debt included in your liquidating distribution.

For example, suppose your distribution includes ,000 in cash and a company vehicle worth ,000 for which the corporation still owes ,000.

This apparent contradiction presents some questions to which there are no black-and-white answers.

In the cases discussed in this article, the Tax Court did not distinguish between personal service corporations, such as CPA firms, and commercial organizations, such as an ice cream distribution company, in identifying the individual ownership of customer-based intangibles.

THE QUESTION OF WHO "OWNS" the clients and customer-based intangibles turns on whether there is an employment or noncompete agreement in effect at the time the intangibles are distributed.

Under these circumstances, you'll calculate your gain or loss using ,000 -- ,000 in cash plus the ,000 debt -- as the proceeds received in exchange for your stock.When a corporation liquidates all of its assets to shareholders, it generally recognizes a taxable gain or loss, though a number of rules exist that limit a corporation's ability to report losses.The corporation is also treated as if the property is sold at fair market value.A NONCOMPETE COVENANT, to be enforceable, must reasonably reflect an employer’s protectable interest in both the nature and the scope of the restraint on the employee.Trade secrets, special processes, patents and proprietary information are among an employer’s protectable interests, but how noncompete provisions create an employer property right isn’t clear.

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