What is a liquidating dividend and a nonliquidating dividend?
Dividends from equity securities will either be deemed liquidating or nonliquidating dividends. Think of liquidating dividends as dividends that are in excess of that particular investors overall share of the retained earnings that they are entitled to. Nonliquidating dividends are normal dividends that should be recognized in net income. Nonliquidating dividends are not distributions in excess of that particular shareholders share of retained earnings.
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