Taxation of liquidating dividends
If the cumulative preference dividends are not declared in a given year, they are said to have been passed and are called dividends in arrears on the cumulative preferred shares.
Then, if the total declared dividend is larger than these two amounts, the excess id divided on a pro rata basis between the two share classes.
Shares may be partially participating or fully participating.
Accounting Terms & Definitions Accounting for Merchandising Activities Debits and Credits (Double Entry Accounting) Business Valuation Formulas Time Value of Money & Present/Future Values Complex Debt & Equity Instruments Common Stock & Shareholder's Equity Accounting & Finance Ratios Valuing Common Stock Corporate Income Taxes Lower of Cost or Market (LCM) & Inventory Valuation Chart of Accounts & Bookkeeping Bonds Payable & Long Term Liabilities Capital Assets GAAP, Accrual & Cash Accounting, Information Commodity, Internal Controls & Materiality Cumulative preferred shares provide that dividends not declared in a given year accumulate at the specified rate on such shares.
This accumulated amount must be paid in full if and when dividends are declared in a later year before any dividends can be paid on the common.
If partially participating, preferred shares may participate in dividend declaration in excess of their preference rate, but the participation is capped at a certain level.
Property Dividends & Spin-Offs: Corporations occasionally pay dividends with non-cash assets.