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BIR Ruling 322
BIR Ruling 322
Facts:
The Company is a trading concern and at present
is in the process of liquidation; and that
individual
stockholders
will
receive
their
liquidating
dividends
in
excess
of
their
investment.
Ruling:
Since the individual stockholders of the Company
will receive upon its complete liquidation all its
assets as liquidating dividends, they will thereby
realize capital gain or loss. The gain, if any,
derived by the individual stockholders consisting
of the difference between the fair market value of
the liquidating dividends and the adjusted cost to
the stockholders of their respective shareholdings
in the said corporation (Sec. 83 (a), Sec. 256,
Income Tax Regulations) shall be subject to
income tax at the rates prescribed under Section
21(a) of the Tax Code, as amended by Executive
Order No. 37.
Moreover, pursuant to Section 34(b) of the Tax
Code, as amended by Executive Order No. 37,
only 50% of the aforementioned capital gain is
reportable for income tax purposes if the shares
were held by the individual stockholders for more
than twelve months and 100% of the capital
gains if the shares were held for less than twelve
months.
Wise & Co. Inc., v. Meer, GR. L-48231
A distribution does not necessarily become a
dividend by reason of the fact that it is called a
dividend by the distributing corporation. "The
ordinary connotation of liquidating dividend
involves the distribution of assets by a