Tax Treatment of Distributions Form

Instructions and help about Tax Treatment Of Distributions

in this video we're going to discuss a standard type of non liquidating distribution in which a corporation issues a dividend to its shareholders and that dividend could be cash it could be property but I just want to talk about the basic rule so a distribution is going to be considered a dividend to the extent that the corporation making the distribution has substantial earnings and profits otherwise known as VMP we're going to talk about what that means an example in a moment but assuming that the corporation does not have sufficient EMP or that the dividend is more than the amount of EMP that's available once the EMP goes to zero or if the EMP is negative to begin with and there is no EMP then the distribution is actually going to reduce the shareholders bases in the stock so that's after the EMP is exhausted right now if the shareholders basis goes to zero and the EMP has been exhausted then any additional amount of the distribution is going to be treated as a gain on the sale or e