A business must file IRS Form 966 when closing a corporation or liquidating stock. The corporation must report the dissolution or liquidation within 30 days of resolving to pursue its plans. The filer must include information such as the section of the tax code under which the corporation is to be dissolved or liquidated.
Closing a Corporation
Only a corporation or a farmer’s cooperative must file a Form 966. Limited liability companies, exempt organizations and qualified subchapter S subsidiaries do not have to file the form. Nor do foreign corporations that are not required to file Form 1120-F, although U.S. shareholders of foreign corporations may be required to report information regarding corporate dissolution or liquidation.
A corporation must file an additional form to report the dissolution of the business if it amends or supplements its original plan. Forms are to be filed with the Internal Revenue Service Center at the address where the corporation files its income tax return. Filers can complete the forms by writing in them or by entering information electronically.
How to fill out IRS form 966
- Write or enter the name of the corporation and its address at the beginning of the form.
- Write or enter the Employer Identification Number
- Choose the type of tax return that the corporation files, like Form 1120 or Form 112-L.
- Write or enter the date and place of incorporation on lines 1 and 2 respectively.
- Choose complete or partial liquidation in line 3.
- Write or enter the date that the resolution or plan of complete or partial liquidation was adopted on line 4.
- Write or enter the IRS Service Center where the immediately preceding tax return was filed on line 5. Or put “e-file” if the return was filed electronically.
- Write or enter the last month, day and year of the immediately preceding tax year and the final tax year on lines 6 and 7a respectively.
- Check “Yes” or “No” in line 7b to answer whether the corporation’s final tax return was filed as part of a consolidated income tax return.
- If “Yes,” write or enter the name of the common parent under which the consolidated return was filed and its employer identification number, and the IRS Service Center where it was filed on lines 7c-7e. Or put “e-file” on line 7e if the return was filed electronically.
- Write or enter the total number of shares that were outstanding when the dissolution of the business or the liquidation of its stock was approved on line 8. Include common and preferred shares.
- Write or enter any dates on which amendments to the dissolution plan were adopted on line 9.
- Write or enter the section of the Internal Revenue Code under which the corporation is to be dissolved or liquidated on line 10, such as “section 331” for a corporation or “section 332” for a subsidiary.
- Write or enter the date of any Form 966 that was filed previously on line 11.
- Attach the resolution or plan in which the dissolution of the business or liquidation of stock was approved and all amendments or supplements not previously filed.
- Sign and date the form. It can be filed by any officer of the corporation who is authorized to sign on its behalf. A fiduciary should sign instead if the return is filed on behalf of a corporation by a receiver, trustee or assignee.
Distributing Corporate Property
A corporation must recognize gain or loss on the distribution of its assets in the complete liquidation of its stock by valuing shares at fair market value, per Form 966. Exceptions can apply to a liquidation of a subsidiary and to a distribution that is made according to a plan of reorganization.
Jim Molis has more than 20 years of experience writing for and about businesses. He has been a business reporter for the Columbus (Ga.) Ledger-Enquirer, a managing editor of the Atlanta Business Chronicle and an editor of the Jacksonville Business Journal. He also has written for management consultants, professional services firms and numerous publications as a freelancer.