When a corporation liquidates, the value of the assets it holds as of the date of liquidation is included in its taxable income for that year. U.S. shareholders then include the value of cash and other assets they receive on their personal tax returns as the sale proceeds against their cost basis in the corporation. Foreign shareholders are not taxed on corporate liquidation.
If its assets, including intellectual property, are sold on installment prior to liquidation, the installment note is usually distributed after the liquidation and becomes an asset held by the former shareholders. The asset has a basis equal to the total amount owed under the obligation, i.e., its face value. If there is no stated amount on the note, such as when the promised payment is an uncertain royalty stream, the fair market value of the future payment streams needs to be determined.