liquidating dividend

(redirected from Liquidating Dividends)

Liquidating dividend

Payment by a firm to its owners from capital rather than from earnings.

Liquidating Dividend

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. This usually happens when shareholders believe that the company is no longer sustainable or profitable. Therefore, liquidating dividends are considered a return of shareholders' investments, rather than profit on them. All of the firm's debts must be paid before it can pay liquidating dividends. See also: Final dividend.

liquidating dividend

A pro rata distribution of cash or property to stockholders as part of the dissolution of a business. For example, a firm may be liquidated because the officers believe its stock price does not adequately reflect the value of its assets. All debts and other obligations usually must be satisfied before issuance of a final liquidating dividend. A stock paying a liquidating dividend is indicated in stock transaction tables in newspapers by the symbol C, next to the dividend column. See also final dividend, General Utilities Doctrine.
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On their 1989 returns, MSSTA reported a $300,000 sale of its assets and T reported no liquidating dividends.
In effect, the Court found that GAAR will be invoked where a tax avoidance arrangement is designed to circumvent the provisions of the Act which would treat liquidating dividends to shareholders as taxable dividends.
The Appellants had only to determine whether or not such a disassociation would occur by the payment of a liquidating dividend by BCo or the sale by the Appellants of their respective shareholdings in BCo.
The Appellants attempted to realize the economic value of BCo's surplus by means of a transaction characterized as a sale of shares giving rise to a capital gain, rather than a distribution of a taxable liquidating dividend.