1. (a) Treatment of amounts distributed in liquidation — Arkansas Code § 26-51-413.

   1. (1)

      1. (A) Amounts distributed in complete liquidation of a corporation are to be treated as full payment for all stock issued.
      2. (B) Amounts distributed in partial liquidation are to be treated as full payment for the stock that was canceled or redeemed.

   2. (2)

      1. (A) The gain or loss to a shareholder from a distribution in liquidation is to be determined by comparing the amount of the distribution with the cost or other basis of the stock.
      2. (B) In the case of amounts distributed in partial liquidation (other than a distribution pursuant to a reorganization plan as described in Arkansas Code § 26-51-412), the part of such distribution that is properly chargeable to the capital account shall not be considered a distribution of earnings or profits within the meaning of Arkansas Code § 26-51-411 for the purpose of determining the taxability of a subsequent distribution by the corporation.

2. (b) Election of Subchapter S corporation status — Arkansas Code § 26-51-413.

   1. (1)

      1. (A) A taxpayer that has elected to be treated as a Subchapter S corporation for federal income tax purposes but not for state income tax purposes (therefore retaining its Subchapter C corporation status), must file an I.R.C. § 338 election with the Individual Income Tax Section of the Department of Finance and Administration stating that it desires to be taxed in accordance with I.R.C. § 338.
      2. (B) This is so despite the fact that the taxpayer may already have an I.R.C. § 338 election on file with the Internal Revenue Service.

   2. (2)

      1. (A) If the taxpayer has elected to be treated as a Subchapter S corporation for both federal and state income tax purposes and the taxpayer has also filed an I.R.C. § 338 election with the Internal Revenue Service, the taxpayer need not file a separate I.R.C. § 338 election with the Department of Finance and Administration.
      2. (B) The taxpayer will automatically receive I.R.C. § 338 treatment by the department for state income tax purposes as well.

   3. (3)

      1. (A) If the taxpayer has elected to be treated as a Subchapter C corporation for both federal and state income tax purposes and the taxpayer has also filed an I.R.C. § 338 election with the Internal Revenue Service, the taxpayer need not file a separate I.R.C. § 338 election with the department.
      2. (B) The taxpayer will automatically receive I.R.C. § 338 treatment by the department for state income tax purposes as well.

Codification Notes: I.R.C. § 338 is codified at 26 U.S.C. § 338.