Accounting Terms & Definitions Accounting for Merchandising Activities Debits and Credits (Double Entry Accounting) Business Valuation Formulas Time Value of Money & Present/Future Values Complex Debt & Equity Instruments Common Stock & Shareholder's Equity Accounting & Finance Ratios Valuing Common Stock Corporate Income Taxes Lower of Cost or Market (LCM) & Inventory Valuation Chart of Accounts & Bookkeeping Bonds Payable & Long Term Liabilities Capital Assets GAAP, Accrual & Cash Accounting, Information Commodity, Internal Controls & Materiality Cumulative preferred shares provide that dividends not declared in a given year accumulate at the specified rate on such shares.
This accumulated amount must be paid in full if and when dividends are declared in a later year before any dividends can be paid on the common.
If partially participating, preferred shares may participate in dividend declaration in excess of their preference rate, but the participation is capped at a certain level.
Property Dividends & Spin-Offs: Corporations occasionally pay dividends with non-cash assets.
Unfortunately, no clear-cut guidance exists regarding the period over which liquidating distributions can be made. Shareholders should maintain documentation that multiple distributions are liquidating distributions whenever multiple distributions are necessary (especially if they will span several tax years and, therefore, result in tax deferral). The request limits the time for assessing tax or beginning a court action to collect the tax to 18 months from the date the request is filed. One example of a situation when a request for prompt assessment might be appropriate is the liquidation of a corporation because of shareholder differences. Keller, and Robert Popovitch, published by Thomson Tax & Accounting, Fort Worth, Texas, 2012 (800-323-8724; ppc.thomson.com).
For example, a plan of liquidation documented in the corporate minutes could state that multiple liquidating distributions will occur and explain the business reasons for this. It does not extend the time in which an assessment can be made beyond three years from the date the return was filed (Regs. If the IRS assesses an additional tax liability after the assets have been divided among the shareholders, disagreements could arise regarding who is responsible for the deficiency. The winners of The Tax Adviser’s 2016 Best Article Award are Edward Schnee, CPA, Ph.
Generally, shareholders are allowed to recover their entire basis before recognizing gain (Rev. On the other hand, filing a request for prompt assessment when there is only one shareholder might not be warranted.
This case study has been adapted from , 25th Edition, by Albert L.
The maximum tax rate for both long-term capital gains (realized after May 5, 2003, and before 2013) and dividends (for tax years beginning after 2002 and before 2013) is 15%.331 when they receive the liquidation proceeds in exchange for their stock.