Author Topic: Nondividend Distributions  (Read 3329 times)

Spork

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Nondividend Distributions
« on: February 18, 2016, 05:38:42 PM »
This is probably a no brainer simple question.

I noticed for the first time on a 1099-DIV I had "non dividend distributions".  A quick google says:

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A nondividend distribution is a distribution that is not paid out of the earnings and profits of a corporation or a mutual fund.  A Form 1099-DIV or other statement showing the nondividend distribution should be issued to the taxpayer.  On Form 1099-DIV, a nondividend distribution will be shown in box 3 and generally is not taxable.  If you do not receive such a statement, you report the distribution as an ordinary dividend.

Basis adjustment.  A nondividend distribution reduces the basis of your stock.  It is not taxed until your basis in the stock is fully recovered.  This nontaxable portion is also called a return of capital.  It is a return of your investment in the stock of the company.  If you buy stock in a corporation in different lots at different times, and you cannot definitely identify the shares subject to the nondividend distribution, reduce the basis of your earliest purchases first.

When the basis of your stock has been reduced to zero, report any additional nondividend distribution you receive as a capital gain on Schedule D.  Whether you report it as a long-term or short-term capital gain depends on how long you have held the stock.

Okay, no problem.  I need to go back and find that equity and reduce my basis by about $130.  No problem.  Except, damned if I can figure out WHICH equity it is.  I have no obvious single transaction for that amount.  I have no transactions for the year that are described even remotely like "nondividend distribution."  I can only suspect it is a handful of things that add up to $130, but ... which ones?

I'd sure LIKE to do things correctly and reduce my basis in my records.  But how the heck to I figure out what to reduce?

protostache

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Re: Nondividend Distributions
« Reply #1 on: February 18, 2016, 06:07:05 PM »
The distribution wouldn't necessarily broken out by type. They would just announce it after the end of the year in a press release or something what percentage to treat as what. IRS has an example right below what you quoted:

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You bought stock in 2002 for $100. In 2005, you received a nondividend distribution of $80. You did not include this amount in your income, but you reduced the basis of your stock to $20. You received a nondividend distribution of $30 in 2015. The first $20 of this amount reduced your basis to zero. You report the other $10 as a long-term capital gain for 2015. You must report as a long-term capital gain any nondividend distribution you receive on this stock in later years.

Does the account that this 1099-DIV is for hold one equity or multiple equities? If it's one, it's pretty simple. You just reduce your basis by $130. If it has multiple equities, I think you'd have to contact the brokerage to figure it out. But, by way of example, REITs tend do this. Bogleheads has a reference that breaks down the Vanguard REIT distributions by year.
« Last Edit: February 18, 2016, 06:08:40 PM by protostache »

Ursus Major

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Re: Nondividend Distributions
« Reply #2 on: February 18, 2016, 11:20:25 PM »
If your broker issues you a consolidated 1099, this information might be on one of the later pages of that form. If still out of luck, call your broker.

BTW there could be multiple securities that are affected by this. And if you traded a security that had a return of capital throughout the year, you need to make sure to allocate that amount correctly between the different lots.

Spork

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Re: Nondividend Distributions
« Reply #3 on: February 19, 2016, 07:31:49 AM »
It is multiple equities. That's why the confusion.

Should I expect to see a transaction (or transactions) that add up to 130? I was expecting to see something similar to a dividend-like transaction during the year with a different description.

I will reread the consolidated 1099 and see if I can find it in there.

Spork

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Re: Nondividend Distributions
« Reply #4 on: February 19, 2016, 01:59:33 PM »
Found it in the 1099 finally.  And I feel stupid.  It was across 2 equities, broken into multiple chunks.

Each one was sandwiched between "nonqualified dividend" transaction types and my brain ran the "nonqualified" and "nondividend" types all together as all nonqualified dividends.

Thanks all

Debbie M

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Re: Nondividend Distributions
« Reply #5 on: February 15, 2019, 09:46:39 PM »
Weird, I've never heard of this before.  So one of my holdings (HASI) has only paid non-dividend distributions (which I had thought were dividend distributions).  This means that the distributions will (eventually) be taxed as capital gains, not dividends.  I feel like I'm in the Twilight Zone!

 

Wow, a phone plan for fifteen bucks!