Question

Business Income

Forum|Forum|5 years ago
February 18, 2021
1 reply
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I was a part owner of a C Corporation sold in 2020. I received a 1099-DIV for the distributions of the sale. The income is reported on box 9 (cash liquidation distributions). I've entered this amount in TurboTax and does not seem to affect the tax. I suspect I need to calculate the basis, but where do I enter that?

J

JeffreyR77

You are correct, 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.

As this answer from @MichaelDC in May 2109 says: "...report the amount in (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 (9) 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."

How to Report Liquidating Distributions

IRS Publication 550, Investment Income & Expenses