S corp liquidating dividend
Paid after satisfying all corporate debts, the liquidating dividend is meant to provide a return on investment.
A corporation issues these dividends if it plans to terminate its business or if it plans to merge with another corporation under a new name.
The company would send me a 1099 tax form filled "only" with Col-8 for Cash distribution / Liquidation. These distributions are, at least in part, one form of a return of capital. You will receive Form 1099-DIV from the corporation showing you the amount of the liquidating distribution in box 8 or 9, in your case they were cash in box 8.
If you acquired stock in the same corporation in more than one transaction, you own more than one block of stock in the corporation.
The result is that the acquirer takes over the target and the former stockholders of the target company now become stockholders in the acquirer.
The former target stockholders get their acquirer stock from a liquidating dividend.
You can report a capital loss only after you have received the final distribution in liquidation that results in the redemption or cancellation of the stock.
This means that the business sells off not just any inventory it may have, but its tools of production, building and any other assets it may have.
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.
As a result, the tax code allows for tax free mergers, or reorganizations.
While there are many different types, the common thread is that in exchange for acquiring a target company's assets or stock, the acquiring company provides its stock, and sometimes cash and other property, to the target company's shareholders.