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Posted by / 07-Sep-2016 23:19

Non cash liquidating distributions

If your Form 1099-DIV shows a cash liquidation distribution, it is not taxable unless the total amount of the distribution you receive exceeds your investment in the stock. 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).If the corporation distributes its assets for later sale by the shareholders, the assets generally “come out” of the corporation with a basis equal to FMV (and with the related recognition of gain or loss under Sec.331 for the difference between the FMV and the shareholder’s basis in the stock).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.

Nonliquidating corporate distributions are distributions of cash and/or property by a continuing corporation to its shareholders.

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.

If the stock is a capital asset in the shareholder’s hands, the transaction qualifies for capital gain or loss treatment.

I received a 1099-DIV with a several thousand $ sum in Box 8 (cash liquidation distribution) because my federal credit union converted to a bank in 2007.

The 1099-DIV does not say where or how this sume should be reported.

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If thedistribution exceeds the adjusted basis of the stock, the excess isordinarily taxed as capital gain, with an exception of minor importancefor distributions out of increase in the value of corporate propertyaccrued before March 1, 1913.