Liquidating Dividends

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  • #2398248 Reply
    TNTTN
    Participant

    Hi all, can anyone tell me why liquidating does not affect RE in Q1, but it does in Q2? Thank you.

    Q1: A corporation declared a dividend, a portion of which was liquidating. How would this declaration affect each of the following?
    Answer: APIC – Decrease, RE – Decrease
    Q2: Ole Corp. declared and paid a liquidating dividend of $100,000. This distribution resulted in a decrease in Ole's:
    Answer: PIC – Yes, RE – No

    AUD - NINJA in Training
    BEC - NINJA in Training
    FAR - 85
    REG - 81
    ^______^
    #2398770 Reply
    chandler
    Participant

    Regular dividends reduce RE. Liquidating dividends are a return of capital, so they reduce APIC.
    The key here is that Q1 is a portion liquidating (and presumably, a portion regular). Thus the liquidating portion reduced APIC while the regular portion reduces RE.
    The Q2 dividends is just liquidating. Thus it only reduces APIC, and not RE.

    Chandler Priest

    Licensed TX CPA

    REG 01/27/18 - 98

    BEC 03/03/18 - 96

    AUD 04/07/18 - 91

    FAR 06/02/18 -96

    #2399802 Reply
    TNTTN
    Participant

    Ahhhh… I see it now. Thank you Chandler.

    AUD - NINJA in Training
    BEC - NINJA in Training
    FAR - 85
    REG - 81
    ^______^
    #2399805 Reply
    TNTTN
    Participant

    Ahhhh… I see it now. Thank you, Chandler.

    AUD - NINJA in Training
    BEC - NINJA in Training
    FAR - 85
    REG - 81
    ^______^
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