Question

The treatment of distributions in liquidations differs from that in nonliquidating distributions in that the corporation is always allowed to recognize loss on a liquidating distribution.
a) True
b) False

Answer 1

Answer:

True

Explanation:

A liquidating dividend is a distribution of cash or other assets to shareholders, with the intent of shutting down the business. This dividend is paid out after all creditor and lender obligations have been settled, so the dividend payout should be one of the last actions taken before the business is closed. Nonliquidating corporate distributions are distributions of cash and/or property by a continuing corporation to its shareholders.