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By the mid-1990s, Culkin was estimated to be worth between £9million and £25million, much of which was drained away, mostly on lawyers' fees during the battle, and Culkin handed over control of his assets to his accountant by 1997.

Tax treatment loss liquidating distributions

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A shareholder’s basis in his S corporation stock is increased by the share of the S corporation income that is passed through to the shareholder.

This effectively gives the shareholder a credit to apply against the earned income when it is ultimately distributed to the shareholder, ensuring that the income is only taxed once.

On the other hand, individual shareholders often prefer that the distribution be treated as a redemption, for three reasons: A distribution qualifies as a stock redemption only if it significantly reduces the interest of the shareholder in the corporation.

Because the income of S corporations is taxed to the owners when the income is earned, a mechanism is needed to ensure that the shareholder is not taxed again when the earnings are distributed.

This is done through a system of rules that track and adjust the shareholder’s stock basis.

These rules (a) allocate the partnership’s income, losses, deductions, and credit among the partners and (b) adjust basis to reflect each partner’s allocation of those items.

As stated in Taxation of Limited Liability Companies and Partnerships, limited liability companies are taxed as partnerships by default.