cash liquidation distribution

[turboquestionnow]

I downloaded TD Ameritrade to Turbo Tax.  Turbo Tax came back with a page that said "We'll handle your cash liquidation distribution of $410 from TD Ameritrade later. Just remember to go to the Investment Income section under Wages & Income" I am done with entering all my numbers and now I back at Wages & Income section but I see nothing that helps me to see whether Turbo Tax has entered this amount from TD Ameritrade on my tax return. Please help.

[GeorgeM777 · Accepted solution]

Your cash liquidation distribution was likely reported on a 1099-DIV, box number 9.  To the extent the cash liquidation distribution represents a return of your capital, it is not taxable; however, it still should be reported on your return.  Any amount in excess of your capital is also taxable, and reported as a capital gain.

If you are using TurboTax online, review the Investment & Savings section (Stocks, Mutual Funds, Cryptocurrency) and see if the $410 has been included in your list of transactions. If not, you can add it.  If it is there, check your cost basis.  A zero as the cost basis would mean that the full amount of the distribution has been taxed as a capital gain.  If you have a cost basis, you can adjust the cost basis amount so that the capital gain is accurate.  

If you are using TurboTax CD/download, the cash liquidation should be in the Investment Income section.  

If the entire distribution represents a return of your capital, then you can enter your cost basis as $410.  Because cost basis and proceeds would be equal in this scenario, you would have neither a gain nor loss. 

@turboquestionnow 

[turboquestionnow]

Thank you GeorgeM777! Your contribution is very much appreciated. I took your advice and went back looking for the basis of that stock's liquidation but oddly enough, on TD Ameritrade's original monthly statement, the $410 was listed as ordinary dividend, yet on the 1099 composite, it was classified as Cash Liquidation Distribution. Anyway, the amount is way lower than my capital invested in that stock so I am not going to worry about excess capital contribution. Just thought it was odd and how reliant and trusting I have become to whatever came out of the broker's computer.

[Rosmakloma]

Hello, I have the same question but am unable to resolve it from the previous answer.  

Turbo Tax reads " We'll handle your cash liquidation distribution from Schwab later.  Just remember to go to the Investment Income section under Wages and Income".  

There is nothing pertaining to the cash liquidation distribution amount under the "Investment Income" section.  I do not see a "Wages & Income" section". Is this old language?

I see the cash liquidation distribution on the 1099-Div in box 9.  

I see the same amount in Turbo Tax in the Personal Income tab, under the "Interest and Dividends" section under the subheading "Dividends on 1099-DIV". How do I make sure the cost basis is correct?  There was a $600 gain on the investment but I do not see that figure listed anywhere.  

Thank you 

[RobertB4444]

In the 'Income' section of your federal return scroll down to 'Investment Income'.  The first line there is "Stocks, Bonds, Cryptocurrency, Other".  Click 'start' or 'update' next to that.

The cash liquidation amount from box 9 should be there on a list.  Click 'edit' next to it and you'll be able to enter the basis.

If it is not listed there then click 'Other' as the type of investment and enter the information about the liquidation distribution.  Then go back and delete it from the 1099-DIV where it was originally entered.

@Rosmakloma 

[user17747376666]

Doing this is as an "other" investment worked, but there are several minor (I hope) glitches. It wasn't quite right was that I had to select the type of investment as "stock (non-employee)" even though I am an employee (the only employee). The stock was not issued as part of an employee stock program, though, so this was the closest selection allowed by TT. Also, there is some mismatch since the corporation issued to me a 1099-DIV for the liquidating distribution (which it the correct way to report this). TT thinks that there was a 1099-B even though this was a direct transaction between the corporation and me, not through a broker. Also, after filling in the information for the "other" investment, TT reports that it "needs review" even though all fields are completed and are accurate. I cannot see anything needing review.

So, it's a workaround but shouldn't be necessary. TurboTax SHOULD let me include basis information for regular 1099-DIV, box 9 distributions.

The statement by the "employee tax expert" that "The cash liquidation amount from box 9 should be there on a list. Click 'edit' next to it and you'll be able to enter the basis." is completely wrong. There is no "edit"next to box 9. If it existed as some point, it no longer exists.

[DianeW777]

Yes, there is no box to enter a basis when entering a 1099-DIV. Although they do have the 'cash in lieu of ' amount in the 1099-DIV, it must be reported as a sale under tax law. The 1099-DIV is not considered as a 'sales' taxable income document like the 1099-B, even though they provide a box for the cash on the dividends form. See additional information below.

How to Report Cash in Lieu of Fractional Shares

1. The IRS considers cash for a fractional share to be money received as the result of a stock sale.
2. This transaction must be reported on IRS tax form Schedule D Capital Gains and Losses. 
3. The date of the sale (when cash was received) and the date of the original stock purchase is needed to complete the tax form.

Tax Basis Example:  Assume a shareholder has an aggregate $100 basis in 50 shares of ABC stock ($2 per share), and the fair market value of one share of ABC stock is $66.65. Following the ABC Merger, the shareholder should have an aggregate $100 basis in 64.1 shares of ABC stock (50 shares x 1.2820, or $1.56 per share), and should be treated as having sold 0.1 shares of ABC stock with a tax basis of $0.156 ($1.56 x 0.1 shares) for $6.67 ($66.65 per share fair market value x 0.1 fractional shares).

Once you have your information you will complete the entry in TurboTax using the following steps.

1. Open (continue) your return if it isn't already open.
2. In TurboTax, search (upper right) > Type 1099B  Press enter > Click the Jump to link 
3. Answer Yes to Did you sell stocks, mutual funds, bonds, or other investments in 2025?
   • If you see Here's the info we have for these investment sales, select Add More Sales.
4. Answer NO to Did you get a 1099-B or brokerage statement for these sales?  or Select Other sales 

@user17747376666