Liquidating cash distributions taxable dr phil dating questions


liquidating cash distributions taxable-36

Use Form 8814, Parents' Election To Report Child's Interest and Dividends, for this purpose.

For more information about the tax on unearned income of children and the parents' election, see chapter 31. Dividends and other distributions you receive as a beneficiary of an estate or trust are generally taxable income.

Corporate shareholders may prefer that the distribution be treated as a dividend, allowing the corporation to take advantage of the special dividends-received deduction under Code ยง 243 (which allows the dividends to only be taxed once at the corporate level).

On the other hand, individual shareholders often prefer that the distribution be treated as a redemption, for three reasons: A distribution qualifies as a stock redemption only if it significantly reduces the interest of the shareholder in the corporation.

If, for instance, a taxpayer receives stock as the result of an inheritance, the IRS usually requires the recipient to assume the fair market value of the stock at the time of the deceased's death as his basis in the stock.