Define non liquidating assets

Liquidity is important in business because it allows firms to quickly deal with unexpected costs without losing financial stability.

Businesses whose assets are very liquid can easily meet any financial responsibilities, while those whose assets are not liquid may have trouble doing so.

But for tax purposes, the defining line can make a big difference.

Witness the situation described in recent letter from the Internal Revenue Service (LTR 200806006, November 7, 2007), which addresses a seeming anomaly related to the tax code.

Creditors are always senior to shareholders in receiving the corporation's assets upon winding up.

However, in case all debts to creditors have been fully satisfied, there is a surplus left to divide among equity-holders.

Liquidate means to convert assets into cash or equivalents by selling them on the open market.2.

When an entity chooses or is forced by a legal judgment or contract to turn assets into a "liquid" form (cash). An individual may choose to liquidate his or her possessions or investments to pay off creditors, convert assets to cash for spending or because the investments are not going to increase in value and the investor wants to re-allocate funds.2.

.boxy-content a.term-action, button.term-action a.term-action:hover, button.term-action:hover .term-action-bg .term-uex .term-cite .term-fc .term-edit .boxy-dflt-hder .definition .definition a .definition h2 .example, .highlight-term a.round-btn, a.round-btn.selected:hover a.round-btn:hover, a.round-btn.selected .social-icon a.round-btn .social-icon a.round-btn:hover a.round-btn .fa-facebook a.round-btn .fa-twitter a.round-btn .fa-google-plus .rotate a a.up:hover, selected, a.down:hover, selected, .vote-status .adjacent-term .adjacent-term:hover .adjacent-term .past-tod .past-tod:hover .tod-term .tod-date .tip-content .tooltip-inner .term-tool-action-block .term-link-embed-content .term-fc-options .term-fc-options li .term-fc-options li a .checkmark .quiz-option .quiz-option-bullet .finger-button.quiz-option:hover .definition-number .wd-75 .wd-20 .left-block-terms .left-block-terms .left-block-terms li .no-padding .no-padding-left .no-padding-right .boxy-spacing @media (min-width: 768px) @media (max-width: 768px) @media print { a:link:after, a:visited:after nav, .term-action, #wfi-ad-slot-leaderboard, .wfi-slot, #related-articles, .pop-quiz, #right-block, .At the corporate level, a nonliquidating corporate distribution can also have varying tax consequences.The distribution may have no tax effect, or it may trigger corporate-level capital gain and/or ordinary income.This mainly occurs during voluntary liquidations of solvent corporations.In financial terminology, assets are items that have value.If it is considered terminated, the company would have been viewed as having completely liquidated, and both it and its shareholders would have experienced the tax consequences attendant to the situation. In other words, in most cases, the liquidation of a corporation commonly engenders two levels of taxation: tax will be imposed at both the corporate and distributee shareholder levels.* The De Facto Company Closure A complete liquidation is not always accompanied by a formal or legal company shutdown. Thus, unless dissolution brings about an automatic transfer of the corporation’s assets to its shareholders, the corporation, even though dissolved, continues its existence.

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