Start Nonliquidating distribution of

Nonliquidating distribution of

This is done through a system of rules that track and adjust the shareholder’s stock basis.

A shareholder’s basis in his S corporation stock is increased by the share of the S corporation income that is passed through to the shareholder.

This effectively gives the shareholder a credit to apply against the earned income when it is ultimately distributed to the shareholder, ensuring that the income is only taxed once.

The shareholder’s basis is decreased (but not below zero) by the shareholder’s share of the S corporation’s items of loss and deduction, nondeductible expenses (except expenses that are not chargeable to the capital account), depletion deduction for oil and gas property, and distributions to the shareholder that are not made from accumulated earnings and profits.

This distinguishes a liquidating dividend from regular dividends, which are issued from the company's operating profits or retained earnings. A liquidating dividend may be made in one or more installments. S., a corporation paying out liquidating dividends will issue to its shareholders a Form 1099-DIV showing the amount of the distribution.

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30-Dec-2019 15:28