Corporate Distributions
Dividends and Other Distributions
When corporations distribute property or cash to shareholders, the tax treatment depends on the nature of the distribution and the corporation's earnings and profits. Distributions may be treated as dividends, return of capital, or capital gains.
- Dividend distributions.
- Return of capital.
- Capital gain treatment after basis recovery.
- Effect of earnings and profits.
Tip
Always determine whether sufficient earnings and profits exist before classifying a corporate distribution.
Summary
Corporate distributions are classified according to statutory ordering rules and earnings and profits.