Dear Kathy: I had purchased Incentive Stock Options back in 2000. It was getting a cash distribution from another company for last few years; 2003 onwards.
Every year it would get money, it would deduct 44% State and Federal taxes and give 56% to share holders per their share in the company. Ricky - Liquidating distributions, sometimes called liquidating dividends, are distributions you receive during a partial or complete liquidation of a corporation.
It is generally paid from the capital of the corporation, upon the decision to suspend all or part of its business operations.
Liquidation dividend remains for shareholders after a firm sells its assets and pays off its creditors.
After the basis of a block of stock is reduced to zero, you must report the part of any later distribution for that block as a capital gain.
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A liquidating dividend occurs when shareholders believe that the company is no longer sustainable or profitable.
Therefore, liquidating dividends are considered a return of shareholders' investments, rather than profit on them.