reit liquidated but i had reinvested dividends-how to report?

[navens]

My broker put me in a REIT years ago.  I always had he dividends reinvested.  The REIT liquidated in 2025.  I got a 1099-Div from them, listing only the cash liquidation amount (box 9).  In Turbotax desktop, if I input this on the 1099-div page, it lists that cash distribution as capital gain.  But there is no mention of the cost, which I assume would be adjusted upward for the nondiv distributions that were reinvested over the years.  Never had to deal with this before.  Do  I delete the 1099-div for this item, and input it somewhere else?  And am I correct that the reinvested divs are ADDED to the original cost basis?  Then I subtract off the liquidation amount, for the realized gain or loss?  Thanks for any help!

 MJ

[DianeW777]

Yes, you would include in your cost all reinvested dividends that were applied to this account before it was liquidated.  The cost basis must be figured out by you. The reporting of this is as noted below.

How to Report Cash in Lieu of Fractional Shares

1. The IRS considers cash for a fractional share to be money received as the result of a stock sale.
2. This transaction must be reported on IRS tax form Schedule D Capital Gains and Losses. 
3. The date of the sale (when cash was received) and the date of the original stock purchase is needed to complete the tax form.

Tax Basis Example:  Assume a shareholder has an aggregate $100 basis in 50 shares of ABC stock ($2 per share), and the fair market value of one share of ABC stock is $66.65. Following the ABC Merger, the shareholder should have an aggregate $100 basis in 64.1 shares of ABC stock (50 shares x 1.2820, or $1.56 per share), and should be treated as having sold 0.1 shares of ABC stock with a tax basis of $0.156 ($1.56 x 0.1 shares) for $6.67 ($66.65 per share fair market value x 0.1 fractional shares).

Once you have your information you will complete the entry in TurboTax using the following steps.

1. Open (continue) your return if it isn't already open.
2. In TurboTax, search (upper right) > Type 1099B  Press enter > Click the Jump to link 
3. Answer Yes to Did you sell stocks, mutual funds, bonds, or other investments in 2025?
   • If you see Here's the info we have for these investment sales, select Add More Sales.
4. Answer NO to Did you get a 1099-B or brokerage statement for these sales?  or Select Other sales 

@navens 

[navens]

Thanks for info, and it leads me to another question.  Through these years I have been receiving 1099-DIV's from the REIT company, which have only shown nondividend distributions (box 3) each year.  However, I was having all of these distributions reinvested.  On several year-end statements these distributions were broken down by month and state "INCOME REINVEST'", then lists price per share, dollar amount of the transaction, # shares purchased, new share total and total new account balance.   A footnote says "Part of your distribution includes return of capital.  Any distribution that represents a return of capital reduces the estimated per share value shown on your account statement."  I have checked, and all these monthly distributions tally up to the nondiv distribution totals that were listed on the 1099-DIV for that year.  So....do I have to do something to calculate how much of that nondiv distribution was a return of capital, versus how much was an actual reinvestment in more shares?  If I am understanding correctly (and I totally may NOT be understanding this), it seems like the return of capital part reduces the cost basis, but the reinvestment part increases the basis.  So I would need to know dollar amounts of each, in order to accurately adjust the basis.  But there don't seem to be specific details about those amounts on these forms.  I am wondering if there are additional calculations that I need to do.  If so, I may just put it all down as decrease in basis (thus potentially increasing my overall tax hit), and not mess with it anymore.   Ugh....

[navens]

I did see the Tax Basis Example in your previous reply, but I am perplexed as to how to use that with the numbers that I have.  Maybe it is just beyond my brain capacity right now.

[DianeW777]

Yes, the statement is correct.  Any portion of 'non-dividend' distribution is a return of your capital and continues to reduce your cost basis until it is gone.

• 'Part of your distribution includes return of capital.  Any distribution that represents a return of capital reduces the estimated per share value shown on your account statement.'

Your thought process is exactly right. It's up to you if you choose to assume your cost basis is low at this point, or if you want to try some calculations to lower your tax bill. Your brain capacity it fine, it's just a detailed review of your specific details and you're not alone when it comes to reinvested dividends and return of capital.

@navens 

[navens]

Thank you, very helpful.  I don't want to mess with a bunch of detailed calculations.  What I do want to do is report the initial investment amount (which was much larger than the total of all the nondividend distributions over the years), and then subtract the total nondividend distributions to adjust the cost basis to the accurate (lower) amount.  In this case, that still leaves a good sized overall loss.  I have the desktop version of turbotax, and once the 1099 div has been entered, I cannot find a place to report the original cost basis.  It would be sort of a 1099-B thing, but I didn't receive one for this investment.  Nor can I figure out how to override the system and just enter all the info on form 8949.  Can you tell me how to accomplish this part?