Partial distribution/Cash liquidation - box 9 1099 - how to report

[Nat2]

Box 9 on 1099-Div shows Cash liquidation for AABA.    This was a Partial Distribution from AABA - the balance is in escrow to be paid in 2020 or 2021 (don't recall).  The amount I received in Box 9 was more than my cost basis so I believe this is a capital gain. 

Just can't see how to show this in Turbotax.  I imported the 1099 from my brokerage but the amount on Line 9 shows on the 1099 but doesn't seem to show up anywhere else in Turbo.  I think I need to show it as a capital gain, but can't see how, and where to record cost basis.  

[94015]

I have the same situation. Those who know the answers, please share your knowledge with us. Thank you in advance.

[Rick19744]

A few comments on this issue:

• ABBA decided to liquidate the Company
• There will be a series of liquidating distributions
• You should know what your basis is in this stock
• You will need to determine if you have any gain on this initial distribution; liquidating distribution minus your stock basis.
• Report this just as you would any other stock sale; form 8949 and Schedule D.
• If your stock basis is higher than the liquidating distribution, then you still need to report it, however, just show the liquidating distribution and basis as the same number which will result in no gain or loss.  You still need to report to avoid a matching notice.
• Keep in mind, that you may receive distributions in the following years.  If you utilize all your stock basis this year, then in the future years EVERYTHING reported on the 1099-DIV will be capital gain.

[Nat2]

Thank you - your answer really helped.  Couple more questions/comments:

1) This was all done manually, as Turbo seemed to just ignore Box 9 listing the cash liquidation/partial distribution.  So without your answer I could have assumed that somehow those gains were taken care of in Turbo (as typical stock sales are when imported from the brokerage) but actually they would not have been reported.  I suspect others may make that error, just by trusting Turbo.

2) I have now entered the cash liquidation amount on Turbo's "Cap Gains Wksht" as a stock sale (not exactly what it was but closest I can see) which transferred it, to form 8949 and SCH D.  I said :Yes" the transaction was reported on Form 1099 (even though it was only reported as a Cash Liquidation (assume that is the correct answer.) I then added show my cost basis, but didn't list any number of shares as sold, as they remain in escrow.  

So that is a little confusing.  But Turbo seems to accept it that.  The capital gains were determined as the cash liquidation amount minus the cost basis.  Future distributions will be 100% cap gain, and I guess will need to do the same thing.

I guess I have done it properly.  Thank you for your help!

[vannerpham]

Hi,

I am also figuring out how to handle the AABA cash liquidation scenario.

I got a 1099-DIV form from my brokerages. Sections 1-8, and 10-15 is all $0.00.  Section 9, 

Cash Liquidation Distributions, is the total amount of cash I received as part of the partial liquidation.

I know my cost basis from when I bought the stock (ESPP), so how and where do I enter in the profit I made? 

Hypothetically, say I had 10 shares at a cost basis of $20, and was given $50 for the partial liquidation so far.

How do I enter in the $300 profit I made so far:  10 shares x $30 ($50-$20)

Do I pay the taxes now? Or do you have to wait to pay taxes after I get the full liquidation (1 or so years from now)?

[Rick19744 · Accepted solution]

@Nat2 based on your follow-up it appears you have handled this correctly.

Your shares aren't really in escrow, what is in escrow is the potential remaining liquidating distributions

If you receive any further liquidating distributions then you have zero cost basis and all is capital gain; assuming you utilized all of your basis in 2019.

[Rick19744]

@vannerpham it appears you have the necessary information to input into your return.

You need to input this into the capital gain worksheet which will then flow into form 8949 and Sch D.

As noted for the other poster, if you utilize all your cost basis in 2019, then if you receive additional liquidating distributions in the future, then all will be capital gain as you have no more cost basis.

[vannerpham]

@Rick19744 

Thank for your response.  It's just not clear if you have to do it on years you get a distribution, or if you have to wait until you get the full distribution.  Do you know if there will be any IRS issues when we eventually get the 1099-B and there is a mismatch (assuming) of the Total Proceed showed on Schedule D vs. Total Proceed as reported on 1099-B?

[TaxNoob18]

You said:

If your stock basis is higher than the liquidating distribution, then you still need to report it, however, just show the liquidating distribution and basis as the same number which will result in no gain or loss. You still need to report to avoid a matching notice.

I received cash liquidation distribution from AABA last year. My initial cash distribution is a couple of thousand less than my basis. It is a loss as of now.

After entering my 1099-DIV (TD Ameritrade), TurboTax says: "We'll handle your cash liquidation distribution from TD Ameritrade later. Just remember to go to Investment Income section under Wages & Income."

TT does not bring up the subject again. How do I report it?

[Rick19744]

@vannerpham It's very clear that you need to report this in the year you receive a liquidating distribution.

You should not receive a 1099-B as liquidating distributions are not reported on that form.  If that was the case, then you would have received one this year.

[ulisse2000]

I have the same issue with Form 1099 Div, column 9 showing Cash Liquidation Distribution. Where exactly under investment income do I enter the distribution amount and the cost basis ?

Thank you

[jschantzj]

Go to Investment Income

ADD another sale

Answer YES if you get asked if you sold something

Select NO to the 1099B question (assuming you did not receive a 1099B)

Continue on to enter Basis and Proceeds information

[jhusmoe]

I have basically the same situation and question.  It is unclear to me how Turbotax handles this when the remaining final cash liquidation distribution is in 2020 but the first cash liquidation distribution in 2019 exceeds the original cost basis.

[jhusmoe]

Rick19744 replies have been helpful although Turbotax itself should be more clear.  Again i have an initial cash liquidation distribution in 2019 reported on 1099-Div Copy B that exceeds my cost basis so there will be a gain.  There will be a final liquidation distribution in 2020 that will be a gain again after the cost basis is used for 2019.  I am still a little confused on whether the 2019 initial cash liquidation distribution should have been reported on the 1099-Div Copy B or some other form.

[Rick19744]

@TaxNoob18 You need to report the liquidating distribution amount and then report your stock basis equal to the amount of the distribution; no gain or loss in the current tax year.

You don't have any tax loss at this time because this is not a closed transaction.  There could be two more liquidating distributions and until these are finalized, you do not have any loss.