Briefly Describe the Reason a Corporation Might Distribute a Property

question 39

Essay

Briefly describe the reason a corporation might distribute a property dividend to a shareholder in lieu of a cash distribution. Describe the tax effects of the property distribution on the shareholder and on the corporation.

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Definitions:

Common Stockholders' Equity

Common stockholders' equity represents the ownership interest held by common shareholders in a company, including assets minus liabilities and preferred stock equity.

Market Value

The ongoing rate at which an asset or service can be traded or acquired in the market.

Stock Dividend

A dividend payment made in the form of additional shares rather than cash.

Stock Split

A corporate action where a company divides its existing shares into multiple shares to boost the liquidity of the shares.