A liquidating dividend occurs
As a result, the tax consequences of a subsequent sale of the assets by the shareholder should be minimal. The corporation is treated as selling the distributed assets for FMV to its shareholders, with the resulting corporate-level tax consequences.Then, the shareholders are treated as exchanging their stock for the FMV of the assets distributed in complete liquidation, with the resulting gains or losses at the shareholder level.
However, the IRS has stated that a shareholder that assumes such a liability will receive capital loss treatment when the liability is ultimately paid by the shareholder (Rev. The corporation recognizes gain or loss for the receivable when it distributes the receivable to the shareholder.Caution: Shareholders may want to evaluate the sale or disposal of stock by the end of 2012 to take advantage of the 15% dividend tax rate, lower individual income tax rates, and lower capital gain tax rates set to expire on Dec. Guidance on the tax treatment of these items in 2013 and subsequent tax years is uncertain, so practitioners should watch for future legislation.Shareholders that do not have a strong preference on whether distributions in 2012 are taxed as dividends or capital gain/loss may prefer sale or exchange (capital) treatment in 2012 if they: Shareholders that assume corporate liabilities or receive property subject to corporate liabilities take the liabilities into account in computing their gain or loss.A regular dividend is the distribution on profits or retained earnings for a period.This is the amount of money the company has earned in addition to the original amount of money the shareholders invested to start the business.