1099-Div line 8 - Cash liquidation Distributions?

[zeros]

My software (Drake) does not have a line 8 in the input screen. The 1099-DIV shows $28,432. on it. Would this mean that the amount is a distribution and not taxable? The company went out of business in 2012.

[S T]

If you were to do a "google search" for the information

you might come across an explanation that Box 8 on a 1099 DIV - cash liquidation is a partial or complete sale of your investment in a Company - even though it is being reported on a 1099 DIV it is not a Dividend.

A company may give a liquidation distribution when it is going out of business-- you could receive a partial or a full liquidation.

There should be some additional information that the t/p received in a notice on the treatment of distribution for tax purposes.

You will need to determine if it is a partial liquidation or a final distribution in order to determine how to report on the Tax Return.

It could be a Schedule D item with basis adjustments, etc

Sandy

[FEDUKE404]

Treatment of distribution

My software (Drake) does not have a line 8 in the input screen. The 1099-DIV shows $28,432. on it. Would this mean that the amount is a distribution and not taxable? The company went out of business in 2012.

I have not seen one of these for a long while. Whether it is taxable or not depends upon several things, to include the original cost basis and any later returns of capital prior to the 2012 event. (It's probable some/most is taxable...)

However, my software does show a line entry (Form 1099-DIV) for box 8. The number apparently does not "go anywhere" but the help/alert later explains the treatment of the distribution (consistent with what Sandy already stated) and clear instructions on how to report the income, including instructions for Sch D if such is needed. (You first can take your cost basis down to zero.) It even includes verbiage such as "nondividend distribution exceeding basis" and instructions to leave the cost/basis blank. I assume the info is taken directly from the relevant IRS instructions for Liquidation Distributions and/or Schedule D??

FE

[Roland Slugg]

No, you don't see an entry in that box very often ... or in the companion Box 9, "Noncash liquidation distributions." Those boxes are used when a corporation does a full or partial redemption of its own shares. The amounts in those boxes reduce the shareholder's basis in the stock, and when it reaches $0, the excess is taxable as a capital gain ... usually long-term.

Out of curiosity I, too, opened a sample return using my software. There are fields to enter amounts from Boxes 8 and 9 of a form 1099-DIV, but when I did, the amounts went nowhere. Surprisingly, "Check Return" totally ignored it, too. At the very least I think "Check Return" should remind the preparer that there may be a capital gain from the liquidation to report on Schedule D. On the other hand, an amount appearing in Box 8 (or 9) of a 1099-DIV doesn't necessarily mean there must be a capital gain or loss showing up on Schedule D. If the liquidating dividend represents just a partial liquidation, and doesn't reduce the shareholder's basis to zero, there is nothing to report on the tax return. Such amounts get a "memo" treatment just like the amounts in Box 3 of form 1099-DIV.