What is a liquidating dividend?

A liquidating dividend is a type of payment that a corporation makes to its shareholders during a partial or full liquidation. For the most part, this form of distribution is made from the company's capital base. As a return of capital, this distribution is typically not taxable for shareholders.

What is a cash liquidation distribution?

A cash liquidation distribution, also known as a liquidating dividend, is the amount of capital returned to the investor or business owner when a corporation is partially or fully liquidated.

Does Sharon have a liquidating dividend?

Sharon owns 1,000 shares in the Tablet Universe Company and the company just announced that it is paying a liquidating dividend. Sharon has only received regular dividends before and is not familiar with a liquidating dividend. Let's see if we can help Sharon with this problem.

How does a company liquidate assets?

The only objective of liquidating the assets is to pay off the debt obligations to the secured and unsecured creditors. Finally, the company distributes the residual amount to the shareholders as liquidating dividends. In the United States, it is a regulatory requirement for the company to pay liquidating dividends.