1040-US: Entering a cash or non-cash liquidating distribution reported on Form 1099-DIV, box 8 or box 9

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Question

How do I enter a cash or non-cash liquidating distribution reported on Form 1099-DIV, box 8 or box 9?

Answer

Liquidating distributions (cash or noncash) are a form of a return of capital. Any liquidating distribution you receive is not taxable to you until you recover the basis of your stock. After the basis of your stock is reduced to zero, you must report the liquidating distribution as a capital gain. If the total liquidating distributions received are less than the basis of the stock, a capital loss is generated. Whether you report the gain or loss as a long-term or short-term capital gain or loss depends on how long you have held the stock.

To enter this transaction in UltraTax CS, open Screen B&D in the Income folder and use the Schedule for detail statement dialog in the Schedule D section. To maintain a record of the liquidating distributions received for the applicable tax year, use the Record of nondividend and liquidating distributions statement dialog in Screen Info in the General folder or Screen Broker in the Income folder.

For further information on the treatment of liquidating distributions, refer to Chapter 1 in Publication 550, Investment Income and Expenses.

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