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

[Rick19744]

@jhusmoe "yes" liquidating distributions are reported on form 1099-DIV.

[jhusmoe]

Thank you Rick19744.  Your posts on this subject have been very helpful

[Rick19744]

@jhusmoe you are welcome.

[TaxNoob18]

Thanks Rick. I kept going back to Wages & Income and explored what to do in that section by clicking everything I can click. Couldn't figure out what/how to report it so I decided to just f** it and I filed it on Sunday.

Your reply is a little too late now. I suspect I must report it but as of now I still don't know how to report it (ie. which section of Turbotax should I use? or what tax form should I use?). Both IRS and state accepted it. Worse case scenario I get audited.

[TaxNoob18]

Rick19744,

If I report my stock basis to be equal to the amount of (1st) partial distribution, won't that make the rest of it capital gain? I mean if I get $5000 in the first distribution and claim $5000 as my basis (but my real basis is $15,000), whatever I get this year or next year becomes capital gain while in fact it is a huge loss.

I understand that I can't claim capital loss (tax year 2019) until final distribution. What I don't understand is how to report it when it is finalized.

[JohnS_CPA]

For the current year report the partial liquidating distribution on the 1099DIV entry forms and enter the amount in box 9. This distribution will not be taxable but it does reduce your basis. You do not report this basis reduction on your 2019 return.

When you receive the final distribution you will again report the 1099DIV amount. Then you will also have to enter the proceeds and basis in the investment income section and report the gain or loss. your proceeds would be the final distribution amount and your basis would be your original basis less the prior partial distribution(s). Unless you receive a 1099B with the final distribution make sure you answer NO to "did you receive a 1099B".

If the 2019 distribution is greater than your basis (i.e. you have a net gain) you would report the 1099DIV amount and also report any gain using the investment income entry section. 

NOTE: The amount entered in Box 9 on the 1099DIV inputs will not be treated as taxable income by Turbo Tax. So if you also make an entry in the investment section you will not double counting income. the only way to report the gain or loss is by making the additional entry in the investment income section. It's necessarily intuitive but that is the only way to get any gain or loss reported.

[TaxNoob18]

jjbldr,

That makes perfect sense. I did report my 1099-DIV with box 9 filled out. That's how I got this after submitting it: "We'll handle your cash liquidation distribution from TD Ameritrade later. Just remember to go to Investment Income section under Wages & Income."

However, TurboTax never brings up the subject ever again. I follow what it tells me to do, go back to Wages & Income but don't know what to do in that section. So I submitted it to both Fed & State on Sunday evening without doing anything extra. They accepted it so I guess I'm ok. Btw, the initial distribution is a few thousand less than my cost basis. It is a loss.

[RT46]

I have read several useful messages about how to report liquidation distribution.  I have a added complication.

I have return of capital on 142 shares of ALTABA for $2400 reported on Form 1099 B included in the 'cost basis reported to irs' Form 8949, part II D, with cost basis showing as 0 showing the entire amount as gain.  In addition at the bottom in the section 'LIQUIDATION DISTRIBUTION'. there is ALTABA liquidation distribution of $7300.  The cost basis is $5,000.  

How do I capture all of this in Form 8949 and /or Schedule D.

THANKS.

[DaveF1006]

You would report this as a regular stock sale. once it is reported, it will appear in your 8949 and Schedule D. To report:

1. Go to federal
2. wages and income

3. Investment Income>show more

4. Stocks, Mutual Funds, Bonds, Other

5. In the description field, indicate that this is liquidation ALTABA distribution 

[Jimmytax]

I filed my taxes with the assumption that the liquidation distribution would be handled by TurboTax in the investment income section as the software noted it would.  The cash liquidation distribution was reported correctly on Schedule B Box 9.  However, my assumption that Turbo Tax accounted for the cost basis and relating gains, or would prompt a question was incorrect.  There was never any follow up in the investment income section.  The software clearly just ignores the cash liquidation distribution.  

The liquidation distribution cost basis was not reported to the IRS - going from Yahoo (YHOO) to Altaba (AABA) and other name changes likely complicated the issue, but I can see that the basis is not being reported.   

I had approximately $20K basis and the liquidating distribution was approximately $30K, so it would appear I should report the $10K gain, presumably as a long-term capital gain?  Additionally, future distributions would be handled as gains as there will be no basis left, is this correct?  At this point, I would surmise that I will have to amend my return to report this $10K capital gain, is this correct?  Or, could I wait until the final liquidation distributions are made and report the entire gain at that point in time?

It seems that TurboTax should fix this issue as I have traditionally had good luck importing my investment data directly from my broker and TurboTax handled it correctly, or at least would alert to the fact that something else needs to be done.  In this case, I only spotted it after I submitted my return, which is unfortunate.

Thanks

[KathrynG3]

Please see answers to your questions below:

1. "I had approximately $20K basis and the liquidating distribution was approximately $30K, so it would appear I should report the $10K gain, presumably as a long-term capital gain?"

It depends. If these assets were held for longer than one year, yes, the liquidation would be reported as a long-term capital gain.

2. Additionally, future distributions would be handled as gains as there will be no basis left, is this correct?

Yes

3. At this point, I would surmise that I will have to amend my return to report this $10K capital gain, is this correct?

Yes, you will need to amend the return. Click the link for details: How do I amend my return? The amendment will affect any state filing, as well.

​​​​​​4. ​Or, could I wait until the final liquidation distributions are made and report the entire gain at that point in time?

It depends. The transactions must be reported on a cash basis when the assets are actually sold.

Please see TurboTax Employee Tax Expert ThomasM125's answer to this Community question: Handle liquidation distribution

@Jimmytax

[dskroback]

Under 1099-DIV i have a 12,360 liquid distribution.  I don't know what the original buying amount was or when.  Do I need to include this in stock sales?  If so, where?

[ThomasM125]

The liquidating distribution would only be taxable and reported on your tax return if it exceeds your basis in the investment.

Your basis is basically your original investment, plus additional money your contributed, plus your share of income from the investment, less losses, less distributions in prior years.

If you determine that your distributions exceeded your basis, you would need to report a sale of investment in TurboTax as follows to report the capital gain realized:

1. Find the "Income and Expenses" menu option in your TurboTax program

2. Find "Investment Income" in the list of categories

3. Click on "Stocks, Mutual Funds, Bonds and Other"

4. Work through the program to find "Choose the type of Investment you Sold"

5. Choose the "Everything Else" option in the list of investments

6. Enter the information requested about your sale (date purchased, sale amount, cost, etc)

The sale amount would be the taxable gain and the cost basis would be zero (-0-).

[sanishik]

DaveF1006 - What should I select in the "Sales Section" as I did not receive 1099B should it be "Long-Term did not receive 1099-B form"?

Thanks

sani 

[aaplfan]

Using Home and Business version of Turbo Tax

Same issue here with Altaba Liquidation Distribution. After importing in the  1099-DIV, Turbo Tax says "We'll handle your cash liquidation distribution of $xx from Altaba INC C/O Computershare later. Just remember to go to the Investment Income section under Income and Expenses.

How do you find that section? I don't see any sections called "Income and Expenses"

Under Federal -> Personal Income -> Investment Income , 

Stocks, Mutual Funds, Bonds, and Other section seems the most appropriate? I guess I can enter it as a sale?