Accounting for liquidating dividend
To me, it would make absolutely no sense to record a "loss" when, in fact, GAAP says to record the gain.
You'd be immediately negating (wiping out) the gain.
So, in other words, this is the account where all the prior year dividends were posted so they wouldn't be taxable(? Just something to keep in mind if you hadn't considered it already.
Seems like the final debit would be a dividend/liquidating distribution.
Some labeled it "loss on liquidation" (on the idea that the corp "sold" land for which they never received anything...hence a loss), others think that essentially the corp is getting back the stock from the shareholder in exchange for the land and therefore think, stock "buy back"...treasury stock. The loan to shareholder was essentially the account where various distributions over the years to the shareholder was recorded. We have had to catch up the accounting and taxes for this corp for the last 10 years since the owner died. But the final entry for 2012 includes the clearing out the loan to shareholder, with accrued interest which we treated as a dividend to her.
And there are those that say you just debit RE and call it a day. The land was distributed to her in liquidation with a FMV.
It essentially represents proceeds from the sale of the stock by the shareholder. We were cleaning things up in 2013 the books/taxes from 2003-2012.
When all is said and done the balance sheet nets to zero and you just turn out the lights and go home. The SH took property from the corp after the death of the husband or sold it for cash.
The shareholders generally recognize gain (or loss) in an amount equal to the difference between the fair market value (FMV) of the assets received (whether they are cash, other property, or both) and the adjusted basis of the stock surrendered.It is generally paid from the capital of the corporation, upon the decision to suspend all or part of its business operations.Liquidation dividend remains for shareholders after a firm sells its assets and pays off its creditors.All of the corporation's debts must be paid before it can pay liquidating dividends.Liquidation dividend is also termed as liquidating dividend.