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Tax consequences of liquidating

The Portfolio also discusses the tax treatment of liquidations before the repeal of that doctrine.

Borden is a professor at Brooklyn Law School in Brooklyn, New York. O'Connor is a partner at Venable LLP in Baltimore, Maryland; Tysons Corner, Virginia; and Washington, D. State law grants partnerships and LLCs the power to merge with other entities.

Schneider is a director (partner) at Goulston & Storrs PC in Washington, D. Once parties decide to combine the assets and liabilities of two or more partnerships or limited liability companies (LLCs) taxed as partnerships or to divide such an entity into more than one entity, they are generally left to choose the form that provides the most advantageous tax results.

For example, if you sell at a gain a share that has been in your portfolio for more than a year, the profit is subject to a capital-gains tax.

If the sale occurs less than one year after the purchase date, your profit is subject to the ordinary income tax rate, which may be greater than the capital gains tax rate.

A liquidation specialist at a brokerage firm can help you anticipate the tax consequences of the portfolio liquidation and advise you about an approach that will maximize the return on your investment.

When you look at your stock portfolio, make note of the number of shares you own of each company's stock and their current value.

Corporations, however, do not receive such favorable terms when selling assets. Cash paid to shareholders upon liquidation is also taxable.