How do I enter a loss related to 1099-DIV box 9 (forced liquidation of a mutual fund)?

[DavidD66]

If the liquidation distribution is reported on Form 1099-B, you would simply report that transaction.  If it is not reported on Form 1099-B, you would report it in the same way you would if it had been.  To enter in TurboTax:

1. Click on Search 
2. In the Search Window type "Capital Loss"
3. Click on "Jump to Capital Loss"

The program will guide you through reporting your transaction.

[bb66]

Thanks, the issues is the distribution was reported in box 9 of 1099-DIV and NOT on a 1099-B.  The Turbotax assistant says "don't worry we will take care of (the distribution) later" but they don't.  So I guess I need to just re-enter the amount even though I entered earlier (the earlier amount appears to have gone nowhere?)

[PattiF · Accepted solution]

From @JamesG1: Form 1099-Div liquidating distributions reduce your basis in the investment.  See IRS publication 550, page 21 Liquidating Distributions

"Any liquidating distribution you receive is not taxable to you until you have recovered the basis of your stock. After the basis of your stock has been reduced to zero, you must report the liquidating distribution as a capital gain. Whether you report the gain as a long-term or short-term capital gain depends on how long you have held the stock."

From a TurboTax discussion on this subject:

You may not need to report this income, however fill in the 1099-DIV as written on the form.
 

Liquidating distributions, sometimes called liquidating dividends, are distributions you receive during a partial or complete liquidation of a corporation. These distributions are, at least in part, one form of a return of capital. They may be paid in one or more installments. You will receive Form 1099-DIV from the corporation showing you the amount of the liquidating distribution in box 8 or 9.

Any liquidating distribution you receive is not taxable to you until you have recovered the basis of your stock. After the basis of your stock has been reduced to zero, you must report the liquidating distribution as a capital gain. Whether you report the gain as a long-term or short-term capital gain depends on how long you have held the stock.
 

If it was a partial liquidation, there is nothing to report on your tax return. You adjust the cost basis of your stock or mutual fund by the amount of the partial liquidation shown in Box 8 or Box 9, then when you eventually sell the stock you will use the lowered cost basis as the purchase price of the stock.

If the liquidating distribution shown in Box 8 or 9 is a complete liquidation, then report the amount in Box 8 or 9 on the stock sale screen as a stock sale. For example, if your cost basis in stock in a company is $1,000 and the company is totally liquidated, then if you receive a 1099-DIV with Box 8 showing $400 and you received nothing else from the liquidation, then you would report the stock as a sale on the stock sale screen and report $400 as the sales price and $1,000 as the cost basis in the stock that was completely liquidated.

@bb66 

[hancfam2]

In my case the distribution is well less than the cost basis. What I can't figure out is how to input the cost basis in turbo tax.  Or do I even need to do that?

Thanks!

[PattiF]

If this was a complete liquidation, then you report this using the distribution and cost basis.

Here is where you would enter the information:

To enter the stock sale without a 1099-B follow these instructions:

•  Click on Income & Investments
• Scroll to Investments and Savings and click on Start (or Edit or Review)
• Click on Add Investments. And then Continue on the next page
•  Choose to Enter a different way
• Pick Stocks, Bonds, Mutual Funds and Continue
• Which bank or brokerage sent you a 1099-B for these sales?, Enter name of brokerage, and Continue
• Answer questions on next page and Continue
• Now, Choose how to enter your sales, One by one, Continue
• Continue past the page Look for your sales on your 1099-B
• You can enter your sales on the next page.
• In the first box, Sales section, Choose Short-term (or long-term) did not receive 1099-B form

Continue with the information to report the complete liquidation proceeds, basis and dates

@hancfam2 

[hancfam2]

Thanks!  I am using TurboTax Premier and titles are slightly different than what is shown on the reply.  What i am working with is shares in a private company.  I purchased them in 7 lots of different size over 18 years and received 1099 DIV with box 9  (cash liquidation distribution)  over the last 5 years (there was 5 years between the last purchase and the 1st distribution).  I have received no 1099-B.  The amount received is significantly less than what i paid in.

In inputting the sales price vs cost basis i see 2 methods: Sum up all the purchases and the 1099-DIV and report as one form, or input each 1099-DIV and associate it with a purchase amount untill they are all covered.

is either way correct?

[PattiF]

Yes, either method to enter the forced liquidation is correct. Make sure that you keep your records for your calculations if you needed to show the IRS if they ever contact you.

@hancfam2