Cash Liquidation Distribution

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DEFINITION of 'Cash Liquidation Distribution'

The amount of capital that is returned to the investor or business owner when a business is liquidated. Cash liquidation distributions are usually considered a nontaxable return of principal. Credit unions send this sort of distribution to their depositors when they are liquidated as well.

INVESTOPEDIA EXPLAINS 'Cash Liquidation Distribution'

Proceeds from cash liquidation distributions are reported on Form 1099-DIV. However, only the amount of distribution that is in excess of the recipient's original investment is taxable. The gain is then reported on schedule D.

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