Liquidating dividend taxability
(B) which related to distributions to which section 302(b)(4) applied and which were made with respect to qualified stock. (C) to (F) as (B) to (E), respectively, and struck out former subpar. 98–369, § 54(a)(1), struck out “of part or all of his stock in such corporation” before “and”. 98–369, § 54(a)(2)(A), substituted provisions relating to a distribution which is made with respect to qualified stock if section 302(b)(4) applies to such distribution or such distribution is a qualified distribution for provisions which had related to a distribution to a corporate shareholder if the basis of the property distributed was determined under section 301(d)(2). If the common parent of any affiliated group filing a consolidated return meets the requirements of clauses (ii) and (iii), each other member of such group shall be treated as meeting such requirements. the distributing corporation and the distributee corporation are members of the same affiliated group (as defined in section 1504 of such Code) which filed a consolidated return for the taxable year which includes the date of the distribution.In a corporate set-up, dividend in the Philippines represents the share of the owners of the corporation – the stockholders.An effective dividend policy in the Philippines would be a coordination of corporate earnings and cash position.
99–514 amended section generally, substituting provisions relating to distributions of appreciated property for provisions relating to LIFO inventory, liability in excess of basis, and appreciated property used to redeem stock.
If the property distributed consists of an interest in a partnership or trust, the Secretary may by regulations provide that the amount of the gain recognized under paragraph (1) shall be computed without regard to any loss attributable to property contributed to the partnership or trust for the principal purpose of recognizing such loss on the distribution.
100–647, § 1018(d)(5)(E), substituted “distribution (not in complete liquidation) with respect to its stock” for “distribution, with respect to its stock,”.
Others would declare dividend as a remedial measure to minimize the impact of 10% improperly accumulated earnings tax in the Philippines (10% IAET), and further avoid SEC sanctions for violation of Section 43 of the Corporation Code of the Philippines on excess of free or unappropriated retained earnings over paid-up capitalization.
For some, dividend declaration is simply a capital restructuring device by transferring free retained earnings to capitalization to increase paid-up capitalization in the Philippines, such as in stock dividends.