Under what condition are dividends classified as 'liquidating'?

Dividends are classified as 'liquidating' when they represent a return of capital to shareholders rather than a distribution of earned profits. This typically occurs when a company is either dissolving or choosing to distribute some of its assets. In this context, when assets are distributed to shareholders, it indicates that the company is returning part of its capital to its investors, which is characteristic of liquidating dividends.

Liquidating dividends differ from regular dividends, which are paid out of the company's retained earnings and represent a share of profit. On the other hand, options referring to accumulated earnings, negative net income, or treasury stock transactions do not pertain to the distribution of assets, thus they do not meet the criteria for dividends to be classified as liquidating. The key factor in determining the liquidating status is the nature of the distribution as a return of capital rather than a profit distribution.