1099-DIV box 9. How to report?

[DianeW777]

Liquidating distributions, sometimes called liquidating dividends, are distributions you receive during a partial or complete liquidation of a corporation. These distributions are, at least in part, one form of a return of capital. They may be paid in one or more installments. You will receive Form 1099-DIV from the corporation showing you the amount of the liquidating distribution in box 8 and/or 9.

Any liquidating distribution you receive is not taxable to you until you have recovered the basis of your stock. After the basis of your stock has been reduced to zero, you must report the liquidating distribution as a capital gain. Whether you report the gain as a long-term or short-term capital gain depends on how long you have held the stock. 

If it was a partial liquidation, there is nothing to report on your tax return. You adjust the cost basis of your stock or mutual fund by the amount of the partial liquidation shown in Box 8 and/or Box 9, then when you eventually sell the stock you will use the lowered cost basis as the purchase price of the stock. 

If the liquidating distribution shown in Box 8 and/or 9 is a complete liquidation, then report the amount in Box 8 and/or 9 on the stock sale screen as a stock sale. For example, if your cost basis in stock in a company is $1,000 and the company is totally liquidated, then if you receive a 1099-DIV with Box 8 showing $400 and you received nothing else from the liquidation, then you would report the stock as a sale on the stock sale screen and report $400 as the sales price and $1,000 as the cost basis in the stock that was completely liquidated.

This is reported as a sale with the taxable amount as the gross proceeds and zero cost basis. Long or short term depends on the holding period.

• Under Wages and Income > Investment Income (Stocks, bonds, mutual funds, other, then select Other)  - You can also use Search (upper right) > type 1099b > Click the Jump to ... Link. 
  • Long term is a holding period of more than one year and receives capital gain tax treatment (0%, 10%, 15%, 20% depending on your regular rate of tax)
  • Short term is a holding period of one year or less and receives ordinary gain tax treatment (your regular rate)

@Frank_Dania

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[MJSQNA]

I cannot seem to find the "investment income" section that the software is referring to in regards to the cash liquidation entries that it is supposed to "help" me with later, but fails to do so.

How do we get to there to find the "other" mentioned in this post?

[MJSQNA]

@JohnB5677How do we report it as a capital gain once we have received cash liquidation distributions that zero out the cost basis? It does not show up as a 2a capital gains entry on the 1099-DIV.  So how do we make up a 2a entry from same brokerage, as it will not match the 1099-DIV received and sent to the IRS by the brokerage.

Also, side note: the former Yahoo shares share count has stayed the same, but they keep throwing off cash liquidation distributions...which is confusing.

[JulieS]

 Yes, you need to report your cash liquidation distribution as a sale of stock if it is more than your initial investment in the stock. 
 
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. The amount of the liquidation reduces 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.
 
This is how to do that in TurboTax:

1. Open your return and select Federal on the left side menu.
2. Select Wages & Income.
3. Scroll down, or expand the list and find Investments and Savings (1099-B, 1099-INT, 1099-DIV, 1099-K, Crypto), expand the section and click Start or Revisit to the right of Stocks, Cryptocurrency, Mutual Funds, Bonds, Other (1099-B).
4. Scroll down and select + Add investments.
5. Click Continue.
6. Select Enter a different way, at the bottom.
7. Select Stocks, Bonds, Mutual Funds (options, index funds, ETFs).
8. Click Continue.
9. Enter the name of the stock or broker, click Continue.
10. Answer the questions about the stock.
11. On the screen Now, choose how to enter your sales, select One by one, click Continue twice.
12. For the first dropdown select Short-term did not receive 1099-B form (owned less than one year) or  Long-term did not receive 1099-B form (owned one year or longer).
13. For type of investment, select Stock.
14. For Box 1a - Description, enter Liquidation distribution.
15. Enter the date you acquired the stock or Various and the date of the liquidation (enter 12/31/22, if no date was provide for the liquidation). 
16. For Box 1d - Proceeds enter the amount of the liquidation distribution from box 9.
17. For Box 1e - Cost or other basis enter your basis.
18. Click Continue, then None of these apply and Continue twice.
     
    The excess of the distribution over your basis will show as a gain on Schedule D.
     

[MJSQNA]

Awesome! Thank you. I will post again if I run into any software hangups if that is okay. @JulieS 

[MJSQNA]

"If this liquidation is a final distribution from the company, you need to report a sale of the stock on Schedule D."- from JulieS

But, I don't think it is a final distribution though, as I still have the same number of shares as before. However, the cash liquidations of the former Yahoo stock are more than the initial cost basis, so with each subsequent cash liquidation it is considered a capital gain.  Would I still report it as if it was sold even though no shares were sold?

The instructions from @JulieS for the schedule D would imply that I sold the shares, but I haven't yet. So is there a different way to report the gains from the cash liquidation without exchange of shares.

[TaxNoob18]

You must report it as soon as it becomes a capital gain. You don't have to report it if it is still a loss. I didn't report it in 2019 and 2020. However, during tax year 2021, my partial distribution exceeds the remaining cost basis so I filed a report. The entire distribution I got in 2022 is 100% capital gain (because my cost basis is now 0).

So if you receive $1000 in 2022 from the liquidation of Altaba and your remaining cost basis in 2022 is $200, you have an $800 capital gain to report. Doesn't matter if this isn't final distribution. If you receive more this year, the entire 2023 cash liquidation is a capital gain you must file next year. Hope that isn't confusing.

[DianeW777]

Only once your cost basis is completely gone, if you have received enough liquidating distributions to repay all of your investment or cost, is any of it reported. This tracking is up to you to keep records.

Liquidating distributions, sometimes called liquidating dividends, are distributions you receive during a partial or complete liquidation of a corporation. These distributions are, at least in part, one form of a return of capital. They may be paid in one or more installments. You will receive Form 1099-DIV from the corporation showing you the amount of the liquidating distribution in box 8 and/or 9.

Any liquidating distribution you receive is not taxable to you until you have recovered the basis of your stock. After the basis of your stock has been reduced to zero, you must report the liquidating distribution as a capital gain. Whether you report the gain as a long-term or short-term capital gain depends on how long you have held the stock.

@MJSQNA 

[MJSQNA]

@DianeW777 

Yes, I understand that it is time to report the over cost basis amount received as a gain...but how do I do that on the TurboTax Home and Business 2022 software if it is not a final distribution as I still have the original amount of shares of former Yahoo. There isn't a section on the TurboTax that walks us through this if no shares were sold, and not a final distribution.

Referencing your post responsefrom yesterday:

"Only once your cost basis is completely gone, if you have received enough liquidating distributions to repay all of your investment or cost, is any of it reported. This tracking is up to you to keep records.

Liquidating distributions, sometimes called liquidating dividends, are distributions you receive during a partial or complete liquidation of a corporation. These distributions are, at least in part, one form of a return of capital. They may be paid in one or more installments. You will receive Form 1099-DIV from the corporation showing you the amount of the liquidating distribution in box 8 and/or 9.

Any liquidating distribution you receive is not taxable to you until you have recovered the basis of your stock. After the basis of your stock has been reduced to zero, you must report the liquidating distribution as a capital gain. Whether you report the gain as a long-term or short-term capital gain depends on how long you have held the stock."

My issue is I know it is to be reported for 2022 but don't know how to do that in the current software for cash liquidations received (over the cost basis) but no stock sold, and not a final distribution.

[JulieS]

No, there is not a special section to enter this as a capital gain, you have to enter it in the same way you would if you had sold it. 

 This is how to do that in TurboTax:

1. Open your return and select Federal on the left side menu.
2. Select Wages & Income.
3. Scroll down, or expand the list and find Investments and Savings (1099-B, 1099-INT, 1099-DIV, 1099-K, Crypto), expand the section and click Start or Revisit to the right of Stocks, Cryptocurrency, Mutual Funds, Bonds, Other (1099-B).
4. Scroll down and select + Add investments.
5. Click Continue.
6. Select Enter a different way, at the bottom. 
7. Select Stocks, Bonds, Mutual Funds (options, index funds, ETFs), click Continue. 
8. Enter the name of the stock or broker, click Continue.
9. Answer the questions about the stock.
10. On the screen Now, choose how to enter your sales, select One by one, click Continue twice.
11. For the first dropdown select Short-term did not receive 1099-B form (owned less than one year) or Long-term did not receive 1099-B form (owned one year or longer).
12. For type of investment, select Stock.
13. For Box 1a - Description, enter Liquidation distribution.
14. Enter the date you acquired the stock or Various and the date of the liquidation (enter 12/31/22, if no date was provide for the liquidation). 
    For Box 1d - Proceeds enter the amount of the liquidation distribution from box 9.
15. For Box 1e - Cost or other basis enter your initial investment.
16. Click Continue, then None of these apply and Continue twice.

 
The excess of the distribution over your basis will show as a gain on Schedule D. Click here to read the IRS instructions on reporting a liquidation distribution.