We are often asked by the directors of companies that have serious financial difficulties why creditors would serve a winding up petition for compulsory liquidation against companies that have no assets.
Although it can be difficult to understand, creditors do liquidate companies with no assets, and we want to discuss why this can happen.
This comes after they announced on March 2 that it was closing 88 stores across the country.
The retailer has negotiated an agreement with liquidation firms Great American Group LLC and Tiger Capital Group LLC.
If the stock is a capital asset in the shareholder’s hands, the transaction qualifies for capital gain or loss treatment.
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The company was de-listed from the New York Stock Exchange after failing to meet the minimum listing requirements earlier this year.
The shareholders generally recognize gain (or loss) in an amount equal to the difference between the fair market value (FMV) of the assets received (whether they are cash, other property, or both) and the adjusted basis of the stock surrendered.Under the agreement, liquidators will sell items at the remaining 132 stores and 14 distribution centers.“While we had discussions with more than 50 private equity firms, strategic buyers, and other investors, unfortunately, we were unsuccessful in our plan to secure a viable buyer of the business on a going-concern basis within the expedited timeline set by our creditors.Then, the shareholders are treated as exchanging their stock for the FMV of the assets distributed in complete liquidation, with the resulting gains or losses at the shareholder level.When determining whether a closely held corporation should be liquidated, the tax consequences to the shareholders should be considered.