If I Received a 1099-DIV, box 8 and TT directed me to "go to Investment Income / Wages & Income, but I'm not sure what to do with it...please help?

[KatherineC · Accepted solution]

Cash liquidation distributions are an amount of capital that is being returned to you.  It is generally a return on your principal investment.  It is only taxable to the extent that it exceeds your basis in the investment.

To enter the remainder of the information you will be prompted to upgrade to Premier.

 When you are on the "Your Income" page:

• Scroll to Investment Income
• Click on Show More if needed
• Click on the button beside Stocks, Mutual Funds, Bonds, Other
• Click Yes
• On the "Did you get a 1099-B or a brokerage statement for these sales?" click no.  (This is coming from your Form 1099-DIV)
• Click beside Stocks
• Enter Cash Liquidation distribution in the description box and any other information you have.  You do not need to know the number of shares.
• You will be asked if you bought the stock
• Enter the date of purchase
• Your total purchase price will most likely equal the amount of the distribution.  If the amount of the distribution exceeds the original cost of your investment, enter the original cost
• You will be asked if the sale was for Qualified Small Business Stock - you can click on the Learn More link to determine if this applies to you.
  

[edubin]

I have this situation.  Is there nowhere I need to indicate that this is not a sale of stock, but rather a complete liquidation of the REIT with a cash distribution to me?  Perhaps the IRS doesn't care about the label?  Also, to piggyback on the original question and answer:  when entering the "total purchase price," is it fair to say I should reduce that by the annual return of investment?  I understand that normally you don't reduce your basis by annual dividends, but I did get a "Tax Capital Statement" analysis letter from the company that indicated that I should do so.  Not sure why.

[KatherineC]

Please submit this information as a new question, so your situation can be fully addressed.

[TomYoung]

Actually, there may not be any reason for you to put that amount anywhere in your income tax return, depending on your situation.

You can think of a liquidating distribution as very much along the lines of a return of capital.  If you have a basis in the stock AND the liquidating distribution is less than your basis and is not a "final" distribution then you don't have to enter anything at all.  In your own records you reduce the basis of the stock.

If the liquidating distribution is more than your basis then you do have a reportable sale.  The liquidating distribution is reported as a sale with the liquidating distribution being the "proceeds" of the sale.

Tom Young

[ro101walker]

I do not see this option on 2020 TT for mac