For the most part, such a distribution is made from the company's capital base, and as a return of capital, is typically not taxable for shareholders.

This can get messier if there's more than one shareholder.Sometimes in life, when faced with a given situation, we say things simply as a matter of reflex. ” “You have a lovely home here.” “You’re a great gal, I’ll call you sometime. Take, for example, the client who contemplates the type of entity that should be used to hold a piece of real estate. As advisors, we keep an army of axioms always at the ready to be used in response to client queries.Despite the tax advantages, investors who receive liquidation dividends often find that they do not cover their initial investment.The partnership tax provisions – Subchapter K of the Internal Revenue Code – work pretty well.