"A corporation is in the process of complete liquidation if at the time distributions are made it is engaged in winding up its affairs by realizing upon its assets, paying its debts, and distributing any remaining balance to its stockholders. ‘It differs from normal operation for current profit in that it ordinarily results in the winding up of the corporation's affairs, and there must be a manifest intention to liquidate, a continuing purpose to terminate its affairs and dissolve the corporation, and its activities must be directed and confined thereto.'"
Liquidation
1. The act of calculating liabilities and distributing assets, especially of a business that is being wound up.
2. The act of determining the cash value of some debt or damage. The parties involved essentially reduce their legal conflict or outstanding debts to a dollar amount. Debts and damages can be liquidated in various ways: by an agreement before any dispute arises, by an agreement after a dispute arises, or by litigation.
Earle v. Comm'r of Internal Revenue, T.C.M. (P-H) P 45,281 (T.C. 1945) (citation omitted).
