Capital gains on liquidation distributions are taxed through shareholder consideration, while the company's asset distribution is not a transfer. Capital gains treatment applies to distributions of assets by a company in liquidation under the new section 68 and the earlier section 46. The liquidating company's distribution of assets to shareholders is not treated as a transfer, so capital gains are not chargeable in the company's hands merely because assets are distributed on winding up. In the shareholder's hands, the amount received as cash or fair market value of assets, reduced by any amount taxable as dividend, is taken as the consideration for capital gains computation, with cost of acquisition and related deductions applied under the earlier regime.
Cases where this provision is explicitly mentioned in the judgment/order text; may not be exhaustive. To view the complete list of cases mentioning this section, Click here.
Provisions expressly mentioned in the judgment/order text.
Capital gains on liquidation distributions are taxed through shareholder consideration, while the company's asset distribution is not a transfer.
Capital gains treatment applies to distributions of assets by a company in liquidation under the new section 68 and the earlier section 46. The liquidating company's distribution of assets to shareholders is not treated as a transfer, so capital gains are not chargeable in the company's hands merely because assets are distributed on winding up. In the shareholder's hands, the amount received as cash or fair market value of assets, reduced by any amount taxable as dividend, is taken as the consideration for capital gains computation, with cost of acquisition and related deductions applied under the earlier regime.
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