Why do companies issue liquidating dividends Live naked mans chat
But if the amount of the receivable that the shareholder ultimately collects differs from the amount that the corporation distributed, the shareholder recognizes gain or loss for the differences in the amounts reported and collected. Observation: The current reduction of the maximum tax rate on capital gains and on qualifying dividends to 15% through 2012 somewhat mitigates the traditional preference for a sale or exchange transaction (e.g., a Sec. However, under current law, distributions made after 2012 will be taxed at higher capital gain and dividend rates.A distribution is treated as one made in complete liquidation of a corporation if it is one in a series of distributions in redemption of all the stock of the corporation pursuant to a plan of liquidation (Sec. As a result, all the distributions necessary to effect a complete liquidation of a corporation do not have to take place on the same date or even in the same year. 80-177 raises the issue of the constructive receipt of assets by shareholders when a corporation adopts a plan of liquidation and the shareholders are entitled to a liquidation distribution at any time after a certain date. Therefore, taxpayers should consider making the final distribution before 2013. A shareholder may claim a loss on a series of distributions only in the year the loss is definitely sustained.
If the corporation distributes its assets for later sale by the shareholders, the assets generally “come out” of the corporation with a basis equal to FMV (and with the related recognition of gain or loss under Sec.
Generally, shareholders are allowed to recover their entire basis before recognizing gain (Rev. On the other hand, filing a request for prompt assessment when there is only one shareholder might not be warranted.
This case study has been adapted from , 25th Edition, by Albert L.
If the stock is a capital asset in the shareholder’s hands, the transaction qualifies for capital gain or loss treatment.
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