In 2019 I received a dividend pay out of $5.68/share. I originally purchased these at $0.10/share in 2015*. When I received my 1099-DIV form it reported $0.84/share in Boxes 1a and 1b. The remaining $4.84/share is reported in Box 3, Nondividend Distributions. I have found all the TurboTax help on Box 3 (and even called them) stating that this is for your own record keeping and won't impact your taxes this year, and the amount should be used to deduct from your cost basis. However, all of the TurboTax examples seem to assume that the amount in Box 3 will always be less than the remaining cost basis. In reviewing IRS publication 550 in the section on Nondividend Distributions, the second example provided is:
You bought shares in XYZ Mutual Fund in 2015 for $12 per share. In 2016, you received a nondividend distribution of $5 per share. You reduced your basis in each share by $5 to an adjusted basis of $7. In 2017, you received a nondividend distribution of $1 per share and further reduced your basis in each share to $6. In 2018, you received a nondividend distribution of $2 per share. Your basis was reduced to $4 per share. In 2019, the nondividend distribution from the mutual fund was $5 per share. You reduce your basis in each share to zero and report $1 of gain. See the Instructions for Form 8949 for details and more information.
The part that applies to me (I believe) is where it says "and report $1 of gain". In my case, instead of the $1 in the example it would be $4.74 ($4.84 - $0.10). Nothing in TurboTax seems to care about this (and their CPA help suggested that if I was supposed to pay Capital Gains then that should have been reported in Box 2a of 1099-DIV, but that seems to be for different scenarios).
The IRS publication says in this scenario to use Form 8949; however, in reviewing that form it seems entirely geared towards calculating Capital Gains on the sale of things. In my case, nothing was sold.
So I am trying to figure out:
1. Do I just wait and pay the Capital Gain taxes when I sell the stock (at which point it would be the sale price plus the $4.74 /share I've already gotten)?
2. Should I assume that the firm creating the 1099-DIV took into account the Cost Basis and that the amount in Box 3 is not actually above the Cost Basis*?
3. Or should I somehow be paying the Capital Gains on this tax period, and if so how do I reflect that?
* These shares were acquired threw a couple of "transactions", so there is also a chance my Cost Basis isn't accurate. I originally was given stock options, which I exercised and purchased the stock. There was then some corporate reshuffling where my stock was converted into Class A stock and Class B stock, and I was given the chance to buy additional Class B stock. In the "conversion", almost all of the capital of my original stock value was applied to the new Class A stocks that were issued, with the exception of $0.10/share for Class B, and the additional Class B stock was also made available at $0.10/share. This is what I am basing my Cost Basis calculations on.
