If thedistribution exceeds the adjusted basis of the stock, the excess isordinarily taxed as capital gain, with an exception of minor importancefor distributions out of increase in the value of corporate propertyaccrued before March 1, 1913.
When multiple properties are distributed, the corporation computes gain on an asset-by-asset basis (Rev. Gain attributable to capital assets and certain property used in a trade or business (Sec. Corporations generally report nonliquidating distributions to shareholders on Form 1099-DIV, Dividends and Distributions (Sec. has held his stock for three years, and his stock basis is ,000. The corporation cannot afford to redeem the stock entirely for cash because its cash balance of ,000 must be used primarily to service real estate debt. The distribution may have no tax effect, or it may trigger corporate-level capital gain and/or ordinary income. The corporate-level tax consequences of a nonliquidating corporate distribution depend on whether the distribution consists of cash or property (other than cash). The form breaks total distributions down into taxable and nontaxable categories. The beginning basis for stock is the amount the shareholder invested to obtain the stock.Nonliquidating corporate distributions are distributions of cash and/or property by a continuing corporation to its shareholders.