Distributions by a corporation to its shareholders are presumed to be dividends unless the parties can prove otherwise.

Question

Quizplus · Accepted Answer

This is known as the "dividend presumption" and is a legal principle in most jurisdictions. Unless the corporation and the shareholder can prove that the distribution was something else, such as a return of capital, it will be treated as a dividend for tax and accounting purposes.

Distributions by a Corporation to Its Shareholders Are Presumed to Be