I've been doing taxes and saw something new that I wanted to get some advice on. I had a small holding in a mutual fund that was closed a while ago, but has not yet been fully liquidated. For the year of 2017, I have a figure reported on 1099-DIV Line 8 - cash liquidation distribution. My understanding is this:
Say my original basis is $100.
If the total amount I've received in cash liquidation distributions is <$100 in all previous years, I report nothing in my tax return and simply subtract the total from the basis (to be used next year).
[eg: Fund closed in 2017, paid out $60 in cash liquidation distributions, I report nothing in my 2017 tax return, and use 100-60=$40 as my remaining basis for the future]
If in the past year, the cash liquidation distribution I received is greater than the remaining basis, then I report this as a simple capital gain.
[eg: same example as above, but in 2018, I get another $50 in cash liquidation distributions, I report $50-$40 as LTCG]
If the fund is fully liquidated in say 2017, and that distribution is still less than my basis, I report a capital loss.
[New eg: Fund closed in 2017, fully liquidated same year, paid out $80 in cash liquidation distributions, I report 80-100 = $(20) as capital loss]
Am I correct in these scenarios?
