What is a 'Liquidating Dividend'

A type of payment made by a corporation to its shareholders during its partial or full liquidation. For the most part, such a distribution is made from the company's capital base, and as a return of capital, is typically not taxable for shareholders. This distinguishes a liquidating dividend from regular dividends, which are issued from the company's operating profits or retained earnings.


Also called liquidating distribution.

BREAKING DOWN 'Liquidating Dividend'

A liquidating dividend may be made in one or more installments. In the U.S., a corporation paying out liquidating dividends will issue to its shareholders a Form 1099-DIV showing the amount of the distribution.


Despite the tax advantages, investors who receive liquidation dividends often find that they do not cover their initial investment.

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