Capital gain from liquidating dividends play wii music without updating
Return of capital payments are often seen in the cases of utility stocks, real estate investment trusts, or corporations which are paying dividends in excess of their earnings and profits. You cannot choose to apply it only to your high cost basis tax lots.
A company may also choose to use net profits to repurchase their own shares in the open markets in a share buyback.
Dividends and share buy-backs do not change the fundamental value of a company's shares.
With the exception of stock dividends, all the other dividends reduce the stockholder’s equity in the corporation. Cash = 3,075,000 Dividends paid based on other than retained earnings are called “liquidating dividends”, as a return of contributed capital rather than a distribution of retained earnings. Retained Earnings 50% [30,000 share x $20] = 300,000 [Credit].
Retained Earnings [Cash Dividend Declared] = 2,000,000 [Credit]. Date of record, April 15, 2009 Memorandum entry that the firm will pay a dividend to all stockholders of record as of today, the date of record. Retained Earnings [Property Dividend Declared] = $600,00 [Credit]. The accounting treatment at the date of declaration consists of debiting retained earnings or scrip dividends declared and crediting notes payable to stockholders or scrip dividend payable. Retained Earnings [Scrip Dividends Declared] = 3,000,000 [Credit]. The transaction is made by a capitalization of retained earnings resulting in a reduction of retained earnings and an increase in some contributed capital accounts. Additional Paid-in-Capital from Stock Dividend 30,000 2. Common Stock Dividend Distribution = 120,000 [Credit].
A DRIP, or dividend reinvestment plan, is a method that allows you to use your dividends to purchase more of the same stock instead of receiving the dividends in cash.