Dividend payments that are the result of liquidation of assets are known as return of capital and are taxed as capital gains.
When an investor receives a portion of their initial investment that is not seen as income or capital gains from the venture, this is known as a return of capital.
Remember that an investor's adjusted cost basis is lowered by a capital return. Any further return is taxable as a capital gain until the stock's adjusted cost basis is lowered to zero.
When someone invests, they risk their principal (sometimes referred to as the cost basis) in the intention of earning a return. The return of capital occurs when an investor receives their principal.
It's akin to getting your original money back because it isn't regarded taxable because it doesn't include gains (or losses).
To learn more about Return of Investment here
https://brainly.com/question/20411423
#SPJ4
