My 1099-div includes Box 3 (nondividend distribution) but nothing in boxes 1 or 2. My basis will go below 0, where do I report the capital gains?

[tztax561090125]

My understanding is that if the basis goes below 0 with returns of capital, then the excess should be reported as capital gains.  Can I add information to boxes 1 and 2 to reflect this, or do I enter this elsewhere in turbotax?

[JohnB5677]

You are correct.  The amount of a non-dividend distribution is usually smaller than the investor's basis in the shares. In the rare case in which the distribution is more than the basis, the shareholder must reduce their cost basis to zero and report the excess amount of the distribution as a capital gain on IRS Form Schedule D.

To do this in TurboTax

Go to Wages & Income

1. Scroll to Investments and Savings

2. Select Stocks, Cryptocurrency, Mutual Funds, Bonds, Other (1099-B)

3. Time to kick off your investments! = Okay

4. Time to kick off your investments! = Continue

5. Let's import your tax info = Enter a different way

6. There are five boxes available

   1. Interest

   2. Dividends

   3. Stocks, Bonds, Mutual Funds

   4. Cryptocurrency

   5. Other

7. You will select Other

You will then go through an interview process to describe the excess distribution.

[pfgold]

I have a stock non-dividend distribution that reduces my basis to less than zero so I have to report the excess as a capital gain. I attempted to follow the steps you outlined in your message but I was unable to find them. I am using the 2022 downloaded version of Turbotax for Home and Business.

[GeorgeM777]

Because you are using TurboTax Home & Business, follow these steps to enter the information regarding your non-dividend distribution.

1. Select the Personal tab.
2. Select the Personal Income tab.
3. On the next screen you will see the option to Walk me through everything, and the option to I'll choose what to work on.  Select the latter.
4. Scroll down the screen to Interest and Dividends, and select the sub-topic Dividends on 1099-DIV.  
5. On the next screen, you will see the option to import your 1099-DIV and the option to I'll type it in myself.  Select the latter as it appears you are reporting one transaction.
6. On the next screen you will enter your information.  When you check the box, My form has info in more than just these boxes, you will see more options, one of which will relate to non-dividend distributions.
7. Proceed to enter your information. 

@pfgold 

[pfgold]

The non-dividend distribution was from an individual stock owned via a brokerage account. The brokerage account 1099-DIV included the non-dividend distribution in Box 3 and I reported as such when I entered the brokerage account information into Turbotax. There is no option for reporting the excess distribution via the 1099-DIV options in Turbotax that I could find. The IRS instructions for Form 8949 indicate the excess distribution should be reported on Form 8949. I did a test inputting the excess like a sale of the stock with a gain equaling the excess and Turbotax put it on Form 8949. Does this sound correct?

[GeorgeM777]

Yes, that's correct.  Once the adjusted cost basis of your stock has been reduced to zero, any further non-dividend distribution is a taxable capital gain that you report on Form 8949, Sales and Other Dispositions of Capital Assets, and Schedule D, Capital Gains and Losses.  While you may have already completed these steps, here they are again.

1. Select the Personal tab.
2. Select the Personal Income tab.
3. On the next screen you will see the option to Walk me through everything, and the option to I'll choose what to work on.  Select the latter.
4. Scroll down the screen to Investment Income and select Stocks, Mutual Funds, Bonds, Other.
5. Enter your information.

When you arrive at the screen, Tell us about this sale, you will enter information that will populate Form 8949.  To the extent you have already recovered your basis in the stock, the excess, as you have noted, is capital gain.  Thus, on this page your cost basis will be zero, and the Sale proceeds will be your capital gain.  The date acquired is the date you purchased the stock and the date sold is the date of the distribution. 

@pfgold