As a business owner, my ordinary income amounts to $50,000. At the beginning of the year, my stock basis stands at $15,000, and I have a section 179 deduction of $15,000.
Once I deduct the section 179, I am left with $35,000 to distribute. I'm uncertain about how to properly enter or classify the following details on my tax returns or 1099-DIV:
$15,000 as a return of capital, which is nontaxable. This distribution will reduce my ending year stock basis to $0.
$20,000 as excess distributions and loan repayments, which are considered taxable long-term capital gains.
Could you please guide me on the appropriate way to handle these entries or classifications?
