What is a liquidating distribution dating relationship discussion groups
Section 331(a) of the IRS tax code says that if a shareholder is eligible to receive a cash liquidation distribution totaling 0 or more, the distribution must be reported on Form 1099-DIV.
The amount reported on a 1099-DIV represents the return of a shareholder’s investment.
Such assets may consist of securities that are illiquid or have certain restrictions or monies held in escrow where it will take several years for the conditions to be met for release of such funds.
This return can be made in more than one distribution if a shareholder purchased blocks of stock over time, as opposed to making a one-time purchase.
Until or unless a shareholder recovers her total investment, the amount reported on a 1099-DIV is not considered taxable income.
Long-term capital gains apply if the holding period is at least one year and a day from the trade date.
Conversely, if an investor does not recover the total investment, she can report a capital loss.