What are liquidating dividends
The term liquidating dividend refers to the process of providing shareholders with a partial or full distribution of their capital investment in the company.
While regular dividends are taxable, liquidating dividends are not taxable since they are merely the return of the shareholder's investments.
Cash can only be paid to shareholders if the company's net assets are positive.
The management team at Company A has decided to declare a dividend of .00 per share and has 800,000 shares of common stock outstanding.
A dividend paid to shareholders out of a company's capital or assets, rather than its earned income.
That is, a liquidating dividend occurs when a company pays more than its total profit in dividends.