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cash liquidation distribution

Forum|Forum|3 years ago
February 28, 2023
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I downloaded TD Ameritrade to Turbo Tax. Turbo Tax came back with a page that said "We'll handle your cash liquidation distribution of $410 from TD Ameritrade later. Just remember to go to the Investment Income section under Wages & Income" I am done with entering all my numbers and now I back at Wages & Income section but I see nothing that helps me to see whether Turbo Tax has entered this amount from TD Ameritrade on my tax return. Please help.

Best answer by GeorgeM777

Your cash liquidation distribution was likely reported on a 1099-DIV, box number 9. To the extent the cash liquidation distribution represents a return of your capital, it is not taxable; however, it still should be reported on your return. Any amount in excess of your capital is also taxable, and reported as a capital gain.

If you are using TurboTax online, review the Investment & Savings section (Stocks, Mutual Funds, Cryptocurrency) and see if the $410 has been included in your list of transactions. If not, you can add it. If it is there, check your cost basis. A zero as the cost basis would mean that the full amount of the distribution has been taxed as a capital gain. If you have a cost basis, you can adjust the cost basis amount so that the capital gain is accurate.

If you are using TurboTax CD/download, the cash liquidation should be in the Investment Income section.

If the entire distribution represents a return of your capital, then you can enter your cost basis as $410. Because cost basis and proceeds would be equal in this scenario, you would have neither a gain nor loss.

@turboquestionnow

G

GeorgeM777Answer

Your cash liquidation distribution was likely reported on a 1099-DIV, box number 9. To the extent the cash liquidation distribution represents a return of your capital, it is not taxable; however, it still should be reported on your return. Any amount in excess of your capital is also taxable, and reported as a capital gain.

If you are using TurboTax online, review the Investment & Savings section (Stocks, Mutual Funds, Cryptocurrency) and see if the $410 has been included in your list of transactions. If not, you can add it. If it is there, check your cost basis. A zero as the cost basis would mean that the full amount of the distribution has been taxed as a capital gain. If you have a cost basis, you can adjust the cost basis amount so that the capital gain is accurate.

If you are using TurboTax CD/download, the cash liquidation should be in the Investment Income section.

If the entire distribution represents a return of your capital, then you can enter your cost basis as $410. Because cost basis and proceeds would be equal in this scenario, you would have neither a gain nor loss.

@turboquestionnow

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turboquestionnowAuthor

Thank you GeorgeM777! Your contribution is very much appreciated. I took your advice and went back looking for the basis of that stock's liquidation but oddly enough, on TD Ameritrade's original monthly statement, the $410 was listed as ordinary dividend, yet on the 1099 composite, it was classified as Cash Liquidation Distribution. Anyway, the amount is way lower than my capital invested in that stock so I am not going to worry about excess capital contribution. Just thought it was odd and how reliant and trusting I have become to whatever came out of the broker's computer.