Report cash liquidating distributions

Once your basis is recovered, the remaining portion is taxable as capital gain.

If you receive a total distribution that is less than your basis, you will have a capital loss.

331, a liquidating distribution is considered to be full payment in exchange for the shareholder’s stock, rather than a dividend distribution, to the extent of the corporation’s earnings and profits (E&P).

The shareholders generally recognize gain (or loss) in an amount equal to the difference between the fair market value (FMV) of the assets received (whether they are cash, other property, or both) and the adjusted basis of the stock surrendered.

In general, a stockholder's basis equals the amount he pays to acquire stock in a corporation, including commissions and related fees.

If a person assumes ownership of stock through means other than purchasing it, the IRS provides guidelines for determining the individual's basis in the stock in IRS Publication 550.

Kathy, We invested 0 to get a family business going 10 years ago. You would use Schedule D, Capital Gains and Losses, (Form 1040).

When determining whether a closely held corporation should be liquidated, the tax consequences to the shareholders should be considered.How you treat it depends upon whether this is a total payment or liquidation, or if it is part of an installment.Basically, the distribution is not taxable up to the recovery of your basis in the stock. You also may receive dividends through a partnership, an estate, a trust, or an association that is taxed as a corporation. Dividends are distributions of money, stock, or other property paid to you by a corporation or by a mutual fund. citizen with dividend income from sources outside the United States (foreign-source income), you must report that income on your tax return unless it is exempt by U. This chapter also explains how to report dividend income on your tax return.


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