While conventional dividends are recorded by the investor as an income from its investment, liquidating dividends are recorded not as an income but as return of the investment.Each blocks of shares acquired must be treated separately and accumulated earnings since the acquisition should be considered only in determining whether a dividend is an ordinary dividend or a liquidating dividend.However, the capital gains tax rate only applies if you have held the shares for more than one year.
This pronouncement from the SC is actually anchored on the provision of our tax code.
It is clearly provided in Section 73(A) of the code that the gain realized or loss sustained by a stockholder is a taxable income or a deductible loss.
In accounting, they are not recognized as income by the investor but as a reduction of the investment carrying value.
It is important to distinguish between ‘normal’ dividends and liquidating dividends because they have different accounting treatment.
You may also enter a specific price at which to sell. Financial service firms, whether full-service or online, must confirm all stock trades.
Verify the number of shares and the prices at which they were sold by reviewing the sales confirmations provided to you by your broker.If you are selling everything, have your broker sell all the stocks you own.If you trade your own stocks in an online brokerage account, enter your sell order manually, including the number of shares of each stock you wish to sell.For instance, in the recent Court of Tax Appeals (CTA) En Banc Case (1702), the Bureau of Internal Revenue (BIR) argued that the capital gains tax is a final tax on the presumed gain from the disposition of a property in exchange for shares of stock pursuant to Section 27 (D)(5) of our tax code.In invoking this provision, one can assume that the BIR is looking from the viewpoint of the stockholder whereby it has all the characteristic of an outright sale.Liquidating dividends are dividends paid in excess of a company’s accumulated earnings.