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Level 4
posted Feb 29, 2024 6:23:00 PM

How to report Nondividend distribution if position is closed (no shares nor basis)?

Suppose I bought 50shs ABC for $115 in Jan 2022.

In Feb 2022, I received a nondividend distribution of $15.

In Jan 2023, the cost basis for 50shs ABC is adjusted to $100 on broker statements.

In Feb 2023, I received another nondividend distribution of $10.

And in March 2023, I sell 50shs ABC for $120.

 

According to Pub 550: “A nondividend distribution reduces the basis of your stock. It is not taxed until your basis in the stock is fully recovered.”

 

However my 2023 1099B lists the sale of ABC with a cost basis of $100, proceeds of $120, and a gain of $20. In other words, the 1099B sale record did not reduce my cost basis from the nondividend distribution received in 2023.

 

Instead the nondividend distribution is listed in a 1099B section “Detail for Dividends and Distributions” with a note: “The tax character of the distribution has been allocated based on information provided by the security issuer.” The nondividend distribution is also listed on 1099DIV line 3.

 

How do I account for the $10 Nondividend distribution received in 2023 then? Apparently the broker does not adjust cost basis for nondividend distributions until the beginning of the following year. But since I closed my entire position of ABC in 2023, there is nothing to adjust in 2024.

 

Thank you.

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1 Replies
Level 4
Mar 7, 2024 8:34:26 AM

Anyone have any insight?

 

If my broker doesn't reduce the cost basis due to nondividend distributions in the same year, I "manually" have to do it myself?

Is it strange, the broker doesn't reduce the cost basis due to nondividend distributions until Jan of the following year?

So what happens if I have zero shares Jan of the following year?

 

Thank you.