Retirement tax questions

A spinoff is the creation of an independent company through the sale or distribution of new shares of an existing business or division of a parent company. A spinoff is a type of divestiture. The spun-off companies are expected to be worth more as independent entities than as parts of a larger business. A corporation creates a spinoff by distributing 100% of its ownership interest in that business unit as a stock dividend to existing shareholders.

The policy dividends you received are a "return of premium," which means that if your insurer had an overall good year, it will give you back part of the premium you paid for your insurance policy. If your insurer issues you a dividend, you can take it in cash, buy additional insurance coverage, or apply the money toward your premium. For life insurance policies, you also can pay off loans you may have taken against your whole life policy.  Life insurance policy dividends are taxable only when the amount you receive in cash exceeds the amount of premiums you have paid. The dividends are taxable only if you take them in cash. If you use your dividends to buy paid-up additions to your policy, they are not taxable. Dividends also may be taxable if your life insurance policy is a modified endowment contract, which is a policy that's overfunded in order to build up greater cash value. Dividends on modified endowment contracts are taxable unless the money is used to buy paid-up additions to your policy.

The cash-in-lieu of the fractional share of stock you received are payments made to investors who received fractional shares as a consequence of stock splits, corporate mergers and reorganizations (such as the spinoff noted above). As a result of the spinoff, you were entitled to receive a fractional share of stock, an amount not equal to a whole share.  In this case, the issuing company only issues whole shares of stock, so you received a cash payment for the fractional share of stock. You are treated as if you received the fractional share and then sold it for the amount of cash you received.

The proper method to handle the cash-in-lieu, which generally results in tax savings, is to allocate your adjusted cost basis to the fractional shares and pay capital gains tax only on the gain or loss.  If the adjusted cost basis amount is not on the form 1099-B, you will need to contact the issuer to see if the basis is available.  


Here's some more details on entering a 1099-B into TurboTax:

Form 1099-B (Proceeds from Broker and Barter Exchange Transactions) reports the sale of stocks, bonds, mutual funds, and other securities.

Here's where you enter or import your 1099-B in TurboTax:
1. Open (continue) your return if it's not already open.
2. In TurboTax, search for "1099-B" or "1099B" (lower-case also works) and then select the "Jump to" link in the
    search results.
3. Answer "Yes" to Did you sell any investments in 2017?
            -If you see Here's the investment sales info we have so far, select Add More Sales.
            -If you're in Free Edition or Online Deluxe, follow the instructions to upgrade to Premier.
4. Answer "Yes" to Did you get a 1099-B or brokerage statement for these sales?
5. At Choose your bank or brokerage or Let Us Enter Your Investment Sale Info, choose how you want to enter your
    1099-B (import or type it in yourself).
6. Follow the onscreen instructions.

If you do not have all of the information necessary, you should contact the issuer of the form and request the information, such as the basis