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In practice, most transactions will take the form of cash paid at closing with some element of future consideration paid on an installment basis. This item focuses on the specific tax implications to the seller of the sale of an S corporation's assets followed by a liquidation, or a case in which the seller sells the S corporation stock and agrees to elect to treat the transaction consistent with Sec. 338(h)(10), a deemed asset sale followed by a liquidation. In both instances, assume that cash and installment obligations (the note) make up the consideration. Further, the Sec. 1374 tax imposed on certain built-in gains is assumed not to apply. Conceptually, either transaction form is easily understood. However...
