Taxation of liquidating

In general, with regular dividends, on and after the ex-dividend date, a seller is still entitled to the payout even if she/he has already sold it to a buyer.

Essentially, a person who owns the security on the ex-dividend date will receive the distribution, regardless of who currently holds the stock.

Notice also that the saving does not entirely depend on using Jane’s lower rates and exemptions – Steve, who pays higher rate tax on all his gains and income, saves £48,980 by taking a dividend.

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This article was first printed in Business Tax Insider in July 2006.

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· Finally, the company applies to the Registrar of Companies to be “struck off” the Register of Companies.

Once the Registrar has done this the company is dead – though, like Dracula, it can sometimes be revived if unforseen liabilities appear.

A formal liquidation must be done by a specialised accountant called a “licensed insolvency practitioner”.

It tends to be expensive (not least because in some circumstances a licensed insolvency practitioner can become personally liable to the company’s creditors if he gets things wrong!

In the United States a corporation paying out liquidating dividends will issue a Form 1099-DIV to all of its shareholders that details the amount of the distribution.

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