Tax treatment liquidating distribution pfic

14-Mar-2018 15:38

Sometimes companies that you own make distributions that are eligible for special tax treatment and do not have to be reported as regular dividend income.This is a different type of distribution from regular return of capital payments that come from dividends paid in excess of accumulated earnings and profits of the corporation.X’s basis in its FC stock is increased by ,000, the amount of gain recognized.X’s holding period in the FC stock for section 1291 purposes is treated as beginning on the day after the effective date of the second borrowing (see § 1.1291-1(h)(5)).Unless otherwise provided under another provision of the Code, a loss realized on a disposition of stock of a section 1291 fund is not recognized.—For purposes of this section, a disposition is any transac- tion or event that constitutes an actual or deemed transfer of property for any purpose of the Code and the regulations thereunder, including (but not limited to) a sale, exchange, gift, or transfer at death, an exchange pursuant to a liquidation or section 302(a) redemption, or a distribution described in section 311, 336, 337, 355(c) or 361(c).Payments received are first recorded as return of capital and then any payments in excess of your adjusted cost basis are capital gains.After the final distribution has been made, if all your cost basis has not been paid back, at this point you can claim a capital loss for the remainder.

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Such pledged stock will be treated as having been disposed of for consideration equal to the lesser of—A pledge of stock of a section 1291 fund, as described in paragraph (d)(1) of this section, will be deemed to occur if such stock serves indirectly as security for the performance of an obligation described in that paragraph, and a principal purpose for the structure of the security arrangement was to avoid the rule of that paragraph.

For the holding period of pledged stock, see § 1.1291-1(h)(5).