Is the 1099-Div I received for sale of company stock correct? How to take into account basis, length of time asset was held?

Forum|Forum|4 years ago
January 29, 2022
2 replies
44 views

The company I used to work for had a buyback and I sold my shares which I've held for 19 years. The basis was $25k and I received a total of $50k in the buyback. They infrequently do buybacks. Today I received a 1099-Div that has the full $50k in box 1a (Total Ordinary Dividend).

Based on these factors:

1) Does it make sense that I would get a 1099-Div instead of a 1099-B?

2) If the 1099-Div is correct, should the entire sale be reported as an ordinary dividend? Or should I be asking the company to use field 9 Cash Liquidation distributions or other fields on the form?

3) Again if 1099-Div is correct, how do I reflect that there's a $25k basis so I should be taxed on the remaining $25k at long-term capital gain rates?

Not A Product Question

Best answer by JamesG1

There are instances where the company does not meet the definition of a broker and has a reporting obligation to file Federal form 1099-DIV.

If a company does not meet the definition of a broker, it may still have a reporting obligation. Form 1099-DIV, Dividends and Distributions, is required to be filed when a company pays a shareholder $600 or more during a calendar year to liquidate all or part of their stock. The amount paid to acquire the shares would be reported on the 2019 Form 1099-DIV in Box 9, Cash Liquidation Distributions, if cash was paid, and/or Box 10, Noncash Liquidation Distributions, at fair market value of the property distributed or paid other than cash. Form 1099-DIV is required to be furnished to recipients by January 31 of the year after the year in which the transaction occurred.

However, you state that the 1099-DIV does not report an entry in box 9 of the 1099-DIV.

It sounds like the entry should be reported as sale of an investment on Schedule D Investment income / Stocks, Cryptocurrency, Mutual Funds, Bonds, Other. You would report a basis of $25 and sales proceeds of $50 and a capital gain.

However, I would contact your employer to see whether they have an explanation why the transaction was not reported in box 9 of the 1099-DIV.

J

JamesG1Answer

Level 15

There are instances where the company does not meet the definition of a broker and has a reporting obligation to file Federal form 1099-DIV.

If a company does not meet the definition of a broker, it may still have a reporting obligation. Form 1099-DIV, Dividends and Distributions, is required to be filed when a company pays a shareholder $600 or more during a calendar year to liquidate all or part of their stock. The amount paid to acquire the shares would be reported on the 2019 Form 1099-DIV in Box 9, Cash Liquidation Distributions, if cash was paid, and/or Box 10, Noncash Liquidation Distributions, at fair market value of the property distributed or paid other than cash. Form 1099-DIV is required to be furnished to recipients by January 31 of the year after the year in which the transaction occurred.

However, you state that the 1099-DIV does not report an entry in box 9 of the 1099-DIV.

It sounds like the entry should be reported as sale of an investment on Schedule D Investment income / Stocks, Cryptocurrency, Mutual Funds, Bonds, Other. You would report a basis of $25 and sales proceeds of $50 and a capital gain.

However, I would contact your employer to see whether they have an explanation why the transaction was not reported in box 9 of the 1099-DIV.

**Say "Thanks" by clicking the thumb icon in a post. **Mark the post that answers your question by clicking on "Mark as Best Answer"