It is used to calculate the capital gain or loss on an investment for tax purposes.

That is, the corporation itself is not subject to federal income tax.

Instead, the shareholders are taxed upon their allocated share of the income.

As a return of capital, this distribution is typically not taxable for shareholders.

A liquidating dividend is distinguished from regular dividends that are issued from the company's operating profits or retained earnings.

Earned income would be from things like wages or self employment income.?

After attaining age 66, you can earn any amount & still collect full Social Security benefits.

A liquidating dividend is also called liquidating distribution.

A liquidating distribution (or liquidating dividend) is a type of nondividend distribution made by a corporation or a partnership to its shareholders during its partial or complete liquidation.

However, a dividend distribution is generally not tax efficient because it is taxable to the recipient to the extent of the corporation's "earnings and profits," but NOT deductible by the corporation.1099-DIV Tax Form.

The 1099-DIV is the tax form that you receive from each company that sends you dividends (or with whom you've started a DRIP plan) if it paid you or more in dividends or withheld any taxes from your dividends (or if the company was liquidated and you received a liquidating distribution).

It is a distribution by a corporation in cancellation or redemption of all or a part of the firm's stock.