Can I sell my stock back to my privately held C-corp as a way to pay capital gains tax rather than income tax?

Question

I am the lone shareholder of an Oregon C-Corporation that was established in 1996. If I sell the assets of the corporation -- which would leave the corporation with several hundred thousand dollars in cash -- can I sell my shares back to the company and simply pay capital gains tax on my shares... rather than having to receive the distribution of cash from the company as regular income (at a higher tax rate)?

Answer 1

You would still have dividend income and NOT capital gain. The reason is  your ownership position has not changed. You still own 100% of the shares and still have 100% control. Owning  100 shares of 100 shares outstanding is the same as owning 1,000,000 shares of 1,000,000 shares outstanding. Doesn't make a difference if you sell 999,900 shares back to the corporation. YOU still own 100%.

Answer 2

You should have been an S-Corp. Then you could just overdraw your basis account for a capital gain.

Selling the assets of the corp may cause it to have to pay a big tax bill.

If you have profits in the corp just pay yourself a qualified dividend.

You should seek advice from an EA or CPA that can look at your corp and give a better answer. This forum is better suited to people who can't figure out their W-4 or why they didn't get $600 on their stimulus check.