Report cash liquidating distributions internet problem validating identity

Posted by / 15-Oct-2016 23:25

Report cash liquidating distributions

Corporations can fold either by dissolution or complete liquidation.Dissolution is an “administrative” termination of the corporation and while it is a usual first step, it doesn’t necessarily mean the corporation is folding. These distributions are, at least in part, one form of a return of capital. After the basis of your stock has been reduced to zero, you must report the liquidating distribution as a capital gain. Answer: Dawn - Liquidating distributions, sometimes called liquidating dividends, are distributions you receive during a partial or complete liquidation of a corporation. Any liquidating distribution you receive is not taxable to you until you have recovered the basis of your stock.

Whether you report the gain as a long-term or short-term capital gain depends on how long you have held the stock.

This means that if the difference between the fair market value of the stock and its adjusted base – the price of the stock minus broker or commission fees – is zero, no tax is due on the amount.

Payments received in excess of the total investment are subject to capital gains tax.

However, a capital loss can't be reported until the corporation issues a final cash liquidation distribution, and once this happens, the shareholder must claim the loss in the year the final distribution was made.

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