Liquidating distributions cash proceeds
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Naked Call The writing of call contracts without owning the underlying stock.
So in summary, a single distribution that is not made in accordance with shareholders’ ownership interests is not a cataclysmic event.
However, the distributions should be corrected as soon as possible, and I would caution you to not make a habit of making disproportionate distributions, or you may well run afoul of Section 1361.
The Agent will thereafter sell the Bitcoin Cash over a period of time, currently not expected to exceed 90 days, and remit the cash proceeds from such sale, net of any administrative and other reasonable expenses incurred by the Agent in connection therewith, to Record Date Shareholders upon completion of the sale.
The Agent will announce a remittance date for the remittance of such net cash proceeds once established.
That being said, in order to avoid jeopardizing its S election, the corporation would be well advised to make a corrective distribution (even though that distribution will also be disproportionate) as soon as possible.
/PRNewswire/ -- Grayscale Investments, LLC, the sponsor (the "Sponsor") of the Bitcoin Investment Trust (OTCQX: GBTC) (the "Trust"), announced that it has today declared a distribution and established a record date for the distribution of all of the Bitcoin Cash currently held by the Trust to shareholders of record ("Record Date Shareholders") as of the close of business on (the "Record Date").
On the Record Date, pursuant to the terms of the Trust Agreement governing the Trust, the Trust will appoint Grayscale Investments, LLC as agent (the "Agent") on behalf of the Record Date Shareholders and transfer the Bitcoin Cash held by the Trust to the Agent on behalf of the Record Date Shareholders.
Practitioners often construe this requirement to be more restrictive than it really is, believing that a single disproportionate distribution will be an indication that you have more than one class of stock, and — Voila! Applying these concepts to our fact pattern above, if the S corporation makes a disproportionate distribution to A and B, the IRS would look to Treas. Section 1.1361-1(l)(2)(i) for guidance on whether the disproportionate distribution is indicative of multiple classes of stock.
Those regulations provide that the determination of whether all outstanding shares of stock confer identical rights to distribution and liquidation proceeds is made based on the corporate charter, articles of incorporation, bylaws, applicable state law, and binding agreements relating to distribution and liquidation proceeds (collectively, the governing provisions).