Dividend payments that are the result of liquidation of assets are known as and are taxed as capital gains.

Question

Quizplus · Accepted Answer

Dividend payments resulting from liquidation of assets are return of capital because they are a distribution of a portion of the investor's original investment. These dividend payments are taxed as capital gains instead of ordinary income because they are a return of the investor's original investment, and not a distribution of earnings or profits.

Dividend Payments That Are the Result of Liquidation of Assets