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user17722069428
Returning Member

How to handle a cash liquidation distribution

A company I worked for a decade ago is dissolving and last year asked me to redeem my paper stock certificate.  Later that year I received a check for the stock as a cash liquidation distribution.  For tax purposes, I received only a 1099-DIV with box 9 (cash liquidation distributions) as the only box filled.  That amount equals the amount of the check I previously received.  I also received a summary of the transaction from the company which includes the issue date of stock, number of shares, liquidation date and cost basis.  I did not receive a 1099-B.  Based on the cost basis I made a profit from redeeming the stock certificate.  I am planning on manually entering this as a stock sale with the cash distribution as the proceeds and using the cost basis they gave me.  Does this sound correct or should it be handled in a different way?

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How to handle a cash liquidation distribution

LIQUIDATION DISTRIBUTIONS

Liquidation distributions, reported on Form 1099-DIV, are distributed when a corporation in which you own stock is going through a partial or complete liquidation. They may be received in the form of cash or noncash. An amount designated as a cash or noncash distribution is often not taxable, but is a reduction of your basis in the stock.

So when you dispose of the stock, your basis for figuring gain or loss is reduced by the amount in this box. (It will result in a larger gain or a smaller loss when you dispose of the stock.)

However, if the basis of your stock is already zero, or is less than the amount shown in this box, the amount is taxable and you need to report the amount that exceeds the basis in your stock as either a long-term or a short-term capital gain.

If this liquidation is a final distribution from the company, you need to report a sale of the stock on Schedule D/ Form 8949

 

 

you can even skip entering the 1099 if that's the only line with an amount. TurboTax does not use it, it does not appear on Schedule B. The info is not transmitted as part of your e-file 

 

 

Form 8949 is the proper place to report it  

 

 

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