See also final dividend, General Utilities Doctrine.
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.
Any liquidating distribution you receive is not taxable to you until you have recovered the basis of your stock.
See If you acquired stock in the same corporation in more than one transaction, you own more than one block of stock in the corporation.
If you receive distributions from the corporation in complete liquidation, you must divide the distribution among the blocks of stock you own in the following proportion: the number of shares in that block over the total number of shares you own.
For the IRS to view a cash liquidating distribution as taxable to its recipient, the amount received must exceed the taxpayer's basis in the corporation's stock.
In general, a stockholder's basis equals the amount he pays to acquire stock in a corporation, including commissions and related fees.
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.
Divide distributions in partial liquidation among that part of the stock redeemed in the partial liquidation.
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.
After the basis of your stock has been reduced to zero, you must report the liquidating distribution as a capital gain.