From Tax Expert BarbaraW22:
"Form 1099-DIV reports Noncash liquidation distributions in Box 10 and Exempt interest in Box 11.
Tthe amount listed as "Exempt interest" in Box 11 of Form 1099-DIV would not be from U.S. Government obligations. Interest from U.S. government obligations are fully taxable on the federal return. The amount reported in Box 11 is not subject to federal income tax and is generally interest from municipal bonds. This amount would be reported in Box 2a of Form 1040. The amount in Box 11 may be subject to state income tax; however, depending on the state.
The amount reported in Box 10 of Form 1099-DIV as Noncash liquidation distributions is generally a nontaxable return of capital. This amount is not reported on your tax return. Instead you adjust the basis of your stock by the amount reported.
If a percentage of your dividend reported on Form 1099-DIV is from US Government obligations, you would calculate the percentage of the amount reported to you in Box 1a and include this in the section "U.S. Government interest" in TurboTax."
Click this link for more info on How to Calculate your US Government Interest.
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