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If, for instance, a taxpayer receives stock as the result of an inheritance, the IRS usually requires the recipient to assume the fair market value of the stock at the time of the deceased's death as his basis in the stock.
If, on the other hand, a person receives stock as payment for services, the IRS requires him to claim the fair market value of the stock as income and assume the amount claimed as his basis in the stock.
A: No, in addition to the initial liquidating distribution, we expect to make one or more additional liquidating distributions in First Quarter 2017.
If a person assumes ownership of stock through means other than purchasing it, the IRS provides guidelines for determining the individual's basis in the stock in IRS Publication 550.
A: A Cash Liquidation Distribution is a non-taxable distribution until such time that the total Cash Liquidation Distributions received exceed the cost basis of the investment.
If the Cash Liquidation Distributions exceed the cost basis, the portion of the Cash Liquidation Distributions that exceeds basis is considered a capital gain and taxed accordingly.
Whether you report the gain as a long-term or short-term capital gain depends on how long you have held the stock.
Q: What are the tax implications for Box 8, Cash Liquidation Distributions for Non-Taxable Accounts (such as IRAs)?