How do I report a CUSIP item with proceeds from a sale of rights when the date of sale question is asked and I did NOT sell the stock?

Where a shareholder does not take up his right to new shares but sells those rights to a third party, the proceeds are treated as a capital distribution and constitutes a part disposal of shares.

You should just report the $10 as the sale proceeds, you can choose to use various as the purchase date and enter the appropriate date of sale. There should be no cost basis in this entry.  Be sure to select the correct holding period.

• Long term is a holding period of more than one year and receives capital gain tax treatment (0%, 10%, 15%, 20% depending on your regular rate of tax)
• Short term is a holding period of one year or less and receives ordinary gain tax treatment (your regular rate)

See the image below to use a different date acquired.

The answer did not help because I did not sell anything , rights nor stock. Proceeds from the sale of rights will be added to the cost basis  of the stock at some future date when i decide to sell it.

If the rights are not sold, they are not taxable, right?

I have the same question for TCEHY Sale of Rights.  I think (I'm no expert here)  that you need to subtract from your Basis the amount paid for the sale of rights, which would increase your gains by that amount of course.  

I definitely do no like treating the payment as a "stock sale" and then entering $0 as the basis.  That does not make sense.

Good Luck to All of Us with this Question

Same Question. Charles Schwab has reported TCEHY Cash Dividend under 1099-B. There is no sale of stock. How do we report this? Appreciate your help.

UNDETERMINED TERM TRANSACTIONS FOR NONCOVERED TAX LOTS [Ordinary gains or losses are identified in the Additional information column] (Line 5)
Report on Form 8949, Part I with Box B checked or Part II with Box E checked. Basis is NOT provided to the IRS. (Line 12)
“Date acquired,” “Cost or other basis,” "Accrued market discount," "Wash sale loss disallowed" and “Gain or loss (-)” are NOT reported to the IRS

Cash dividends paid reduces the basis in TCEHY stock. You do not need to report this  in your return as this was reported to you for informational purposes. 

@sadesai 

Thank you @DaveF1006 for your guidance. Couple of days back, I also pointed this out to Charles Schwab brokerage, and they mentioned that it is a mistake, and they will issue 1099-DIV. They also suggested me to get extension as they will not be able to issue one in time. As I am not planning extension, I may just go with your suggestion. I hope that's ok. This is so confusing as transaction description in my brokerage account is Cash Dividend. 

In my original answer, I assumed this was a non-dividend distribution since you did not receive a 1099 DIV. I overlooked the fact that you mentioned cash dividend, which means it was distributed to you. I apologize for my mistake. let me help to rectify this error.

To avoid filing an extension, report this in the following manner. in this case, you will report this as you received the 1099 DIV

1. Go to federal
2. Wages and Income
3. Interest and Dividends
4. Dividends on 1099 DIV
5. When you get to the section asking how you will like to enter the 1099 DIV, indicate you would like to type this in yourself
6. in the first box, enter Charles Schwab Brokerage Services. Enter the amount of the cash dividend in Box 1A as an ordinary dividend.  

Call Charles Schwab and ask them if these were qualified dividends.  if so, enter the amount in Box 1B and find out if there are any capital gains distribution to report in Box 2A.

@sadesai 

Thank you for clarifying! This was really helpful. 

@DaveF1006 Charles Schwab seem flooded with requests so getting any accurate answer seems difficult. Just to confirm, If I already have 1099-DIV from Charles Schwab, can I just add this amount to actual 1099-DIV amount? Thanks!

Yes. You may add this amount to Box 1A in the 1099 DIV entry.

@sadesai 

I had the same issue for TCEHY entry that had the additional info in 1099 as proceeds from sale of rights. TurboTax was mandating to enter a cost basis as it was blank from the 1099 download for this entry. After talking to a TT advisor over phone they pointed out about the 1099 having info about this gain or loss not reported to the IRS. On a closer look it mentioned that it had to be reported on form 8949 and TT had automatically added this form with the necessary info from 1099. All I had to do was enter the cost basis as 0 and the error got cleared and it didn't change my tax due from what it was earlier.

What you have listed is not a dividend. It's a proceed from sale of rights that's listed under 1099-B as "Undetermined term transactions for noncovered tax lots"and if you check the forms TT would have added a 8949 automatically for this.

Hi DaveF1006, Sorry I am confused. If the broker tells you that it is capital gain, could you claim it is dividend if the broker does not or refuses to issue 1099-DIV? How shall we explain this to IRS if it asks ? Thank you!

Dividends are taxed at a different rate than capital gains.  Therefore, it will make a difference depending upon the type of dividend you are asking about.  Qualified dividends are taxed as long term capital gains. Please see this link for a more detailed explanation.  

The broker will typically report your investments from the year and will summarize them according to their proper classification on Form 1099-DIV, 1099-INT, or 1099-B as applicable.  If you believe your 1099-DIV is incorrect, you should have support for the amount you report on your tax return should the IRS question items on your return.  The IRS will take the amounts reported on your tax forms such as the 1099-DIV and will ensure they match what you report on your individual tax return.

Please see this link from the IRS for more guidance when an incorrect 1099 form is issued.

@Hardway