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

[DianeW777]

You can continue to follow the same procedure by entering the taxable gain as the selling price and leave the cost basis zero as indicated in the earlier posts by our awesome Tax Experts @ThomasM125 and @DaveF1006.

The taxable amount of the distribution is the same as if you entered a cost basis and the full amount of the payment.

Keep all tax documents with your tax return so that you will know the process should you need any information for the IRS at any time in the future (within the three year statute of limitations).

• Generally, the statute of limitations for the IRS to assess taxes on a taxpayer expires three (3) years from the due date of the return or the date on which it was filed, whichever is later. A return is considered to be filed on the due date of the return if it was filed on or before its due date.
  • IRSTop 305 - Recordkeeping

@TaxNoob18

[TaxNoob18]

"You can continue to follow the same procedure by entering the taxable gain as the selling price and leave the cost basis zero"

Sorry for being dense. I'm not an expert in this field. In my case, does taxable gain equal to the following?

cash distribution in 2021 ($1,477.30) - remaining cost basis ($468.84) = $1008.46

[GeorgeM777]

Yes, that is correct.  As a follow-up to @DianeW777, @ThomasM125, and @DaveF1006, you can report your transaction as you have indicated in your last post.  

It appears that you are recovering your cost basis as a result of the cash distributions, so now, and on a going-forward basis, your cost basis is zero.   If there are any additional cash distributions, you can leave the cost basis box blank. There is no need to enter zero and in fact, entering zero may interfere with TurboTax calculations.

@TaxNoob18

[TaxNoob18]

Got it. Thanks again to @DianeW777, @ThomasM125, @GeorgeM777  and @DaveF1006 for your assistance.

[TaxNoob18]

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@GeorgeM777 wrote:

There is no need to enter zero and in fact, entering zero may interfere with TurboTax calculations.

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I left cost basis field empty but TT flags it (it shows Needs Review). Went back to enter 0 in the field. "Needs Review" disappears.

[Cono Emanuele]

How do you report this on the Form 8948?  I am not able to do this

[DianeW777]

You don't have to manually complete Form 8949. When you make your entry in TurboTax, it will flow to Form 8949 if necessary.  Follow the steps in the link below for entering your investment sale.

• Where is Form 8949?
• Search (upper right) > type schedule d > use the Jump to... link select 'Review' on Personal items sale (Form 1099-K) > follow the prompts to complete the cost entry
  • Where do I enter investment sales?

@Cono Emanuele 

[Mahimboy]

This is my understanding and in no way is it legal or professional.

Turbotax does not pick it up because it is not reported as a 1099-B so you have to manually enter it.

You can find you basis in a monthly brokerage statement (say end of year statement). If the basis is not 0 then

the basis gets reduced by the cash distribution amount and this needs to be taken into account in any future cash distribution or sale. If the basis is not 0 after this reduction then no reporting is currently needed.

If the basis reduces to 0 then the excess of the cash distribution is reportable as a sale.

If you go to Investment income under Wages & Income and then Stocks. You just add a sale. The amount of the cash distribution (or the excess after the basis is reduced to 0) is the proceeds and the basis is 0. The date of the cash distribution is the sale date. If you do not have the acquisition date you can choose from the drop down menu.