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Wendy Reed
Wendy Reed, Enrolled Agent
Category: Tax
Satisfied Customers: 3346
Experience:  15+ years tax preparation and tax advice.
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Does cash liquidation distribution have to be reported?

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Does Cash Liquidation Distribution in BOX 8 of 1099-DIV have to be reported? This is the first time I have received a 1099-DIV with an entry in BOX 8.The only info I have is the amount. I understand that this is a partial return of capital, only reducing the cash basis of the sock, and could be there for informational purposes only. How shall I treat it?

Thank you for giving me the opportunity to assist you. I will give the best answer that I can with the information provided.

Publication 550 describes the tax treatment of this type of distribution. How you treat it depends upon whether this is a total payment or liquidation, or if it is part of an installment.

Basically, the distribution is not taxable up to the recovery of your basis in the stock. Once your basis is recovered, the remaining portion is taxable as capital gain. If you receive a total distribution that is less than your basis, you will have a capital loss. If you bought more than one block of stock, you will need to figure it out based on the instructions provided.

If there is no capital gain or loss (distribution and basis the same), you do not need to report it but you may choose to, by listing it on Schedule D with no gain or loss.

Please see page 22 in the following publication under "liquidating distributions":

Customer: replied 6 years ago.

The distribution is from several companies, but I can't find the names. I am dealing with a financial advisor representing a large investment company, and it is very hard to get any information from them. On Schedule D: Description of Property – Various Dates Acquired, Sold. I could leave this blank. Sales Price and Cost OR Other Basis, both entries could have the amount of distribution. Please let me know if this is okay.

I would not leave the dates blank. I would determine first if it is long or short term holding period. You could put "various" under date purchased, and use the liquidation date as the sold date. The fund company should be able to tell you that. And if you are sure that this is a total return of capital, then put the same amount as basis and proceeds as what is listed in box 8 of your 1099DIV.
Customer: replied 6 years ago.

This is only a partial return of capital reducing the cost basis, but the companies are not liquidating, and maybe that I could enter “Various” for the Date Sold also. Actually, no stock is being sold. Would that be okay?

I would proceed as described in the publication under "stock acquired at different times".

If you are sure that it is all return of capital, then proceed as you have mentioned, but I would not use "various" for date sold. I would use the date that the liquidation was done. You should have this somewhere on a statement or a check if you received cash.

Wendy Reed, Enrolled Agent
Category: Tax
Satisfied Customers: 3346
Experience: 15+ years tax preparation and tax advice.
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