The main basis is that such transaction is subject to ordinary income tax on the part of the individual stockholders, or corporate-income tax for corporate stockholders. There is, therefore, no room for interpretation.” Moving forward, while there may be various interpretations of the law if viewed from an interdisciplinary perspective, for taxation purposes, the term-liquidating dividend may only be viewed as not subject to tax on the point of view of the distributing corporation.
But this is subject to tax on the part of the receiving stockholder.
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).
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.
Our principal business activities are to dispose of the assets formerly held by Winthrop Realty Trust in an orderly fashion.
Winthrop Realty Liquidating Trust K-1s are available as of March 15, 2019 at PM.
If the stock is a capital asset in the shareholder’s hands, the transaction qualifies for capital gain or loss treatment.
AS early as 1947, our Supreme Court had already characterized the gain or loss sustained by a stockholder of a corporation as a taxable income or a deductible loss.
For instance, in the recent Court of Tax Appeals (CTA) En Banc Case (1702), the Bureau of Internal Revenue (BIR) argued that the capital gains tax is a final tax on the presumed gain from the disposition of a property in exchange for shares of stock pursuant to Section 27 (D)(5) of our tax code.
In invoking this provision, one can assume that the BIR is looking from the viewpoint of the stockholder whereby it has all the characteristic of an outright sale.
Instead, the liability reduces the amount realized by the shareholder.
If the property distributed is worth less than the amount of the liability itself, the FMV of the property is treated as no less than the amount of the liability (Sec. The assumption of a contingent or unknown liability is disregarded in determining the property’s FMV. A corporation, whether it uses the cash or accrual basis, may have earned income that it has not collected before the liquidation takes place.