Corporate taxation nonliquidating distributions


22-Jul-2017 11:39

To be taxed as a liquidating distribution, however, a partner's interest in the partnership must terminate.

Only partners who receive a liquidating distribution of cash may have an immediate taxable gain or loss to report.

Corporate distributions of cash or property are classified as taxable dividends to the extent of the corporation's current or accumulated earnings and profits, which is a tax accounting concept that is somewhat similar to the financial accounting concept of retained earnings.

Despite the tax advantages, investors who receive liquidation dividends often find that they do not cover their initial investment.

The value of marketable securities, such as stock investments that are traded on a public stock exchange, and decreases to your share of the partnership's debt are both treated as cash distributions.

When the total amount of cash distributed is more than a partner's basis in her partnership interest, the difference in the two amounts is a gain.

3) When a change in the tax law is deemed necessary by Congress, the entire Internal Revenue Code must be revised.

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4) The largest source of federal revenues is the corporate income tax.In some cases, the courts have ruled that withdrawals from two closely held corporations were constructive corporate distributions rather than loan proceeds and repayments. A constructive dividend arises when a corporation distributes earnings and profits to shareholders without formally declaring a dividend but without the expectation of repayment.



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