Liquidating Dividend


DEFINITION of '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.

  1. Dividend

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  2. Liquidation

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  3. Earnings

    The amount of profit that a company produces during a specific ...
  4. Return Of Capital

    A return from an investment that is not considered income. The ...
  5. Nontaxable Dividends

    Dividends from a mutual fund or some other regulated investment ...
  6. Record Date

    The cut-off date established by a company in order to determine ...
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  2. Do dividends affect working capital?

    Regardless of whether cash dividends are paid or accrued, a company's working capital is reduced. When cash dividends are ... Read Full Answer >>
  3. Do mutual funds pay dividends?

    Depending on the specific assets in its portfolio, a mutual fund may generate income for shareholders in the form of capital ... Read Full Answer >>
  4. How often do mutual funds pay capital gains?

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  5. Can dividends be paid out monthly?

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