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Solved

Partial distribution/Cash liquidation - box 9 1099 - how to report

Forum|Forum|6 years ago
February 17, 2020
7 replies
0 views

Box 9 on 1099-Div shows Cash liquidation for AABA. This was a Partial Distribution from AABA - the balance is in escrow to be paid in 2020 or 2021 (don't recall). The amount I received in Box 9 was more than my cost basis so I believe this is a capital gain.

Just can't see how to show this in Turbotax. I imported the 1099 from my brokerage but the amount on Line 9 shows on the 1099 but doesn't seem to show up anywhere else in Turbo. I think I need to show it as a capital gain, but can't see how, and where to record cost basis.

Best answer by Rick19744

@Nat2 based on your follow-up it appears you have handled this correctly.

Your shares aren't really in escrow, what is in escrow is the potential remaining liquidating distributions

If you receive any further liquidating distributions then you have zero cost basis and all is capital gain; assuming you utilized all of your basis in 2019.

94015

I have the same situation. Those who know the answers, please share your knowledge with us. Thank you in advance.

Rick19744

Employee

A few comments on this issue:

ABBA decided to liquidate the Company
There will be a series of liquidating distributions
You should know what your basis is in this stock
You will need to determine if you have any gain on this initial distribution; liquidating distribution minus your stock basis.
Report this just as you would any other stock sale; form 8949 and Schedule D.
If your stock basis is higher than the liquidating distribution, then you still need to report it, however, just show the liquidating distribution and basis as the same number which will result in no gain or loss. You still need to report to avoid a matching notice.
Keep in mind, that you may receive distributions in the following years. If you utilize all your stock basis this year, then in the future years EVERYTHING reported on the 1099-DIV will be capital gain.

*A reminder that posts in a forum such as this do not constitute tax advice.Also keep in mind the date of replies, as tax law changes.

Nat2Author

Thank you - your answer really helped. Couple more questions/comments:

1) This was all done manually, as Turbo seemed to just ignore Box 9 listing the cash liquidation/partial distribution. So without your answer I could have assumed that somehow those gains were taken care of in Turbo (as typical stock sales are when imported from the brokerage) but actually they would not have been reported. I suspect others may make that error, just by trusting Turbo.

2) I have now entered the cash liquidation amount on Turbo's "Cap Gains Wksht" as a stock sale (not exactly what it was but closest I can see) which transferred it, to form 8949 and SCH D. I said :Yes" the transaction was reported on Form 1099 (even though it was only reported as a Cash Liquidation (assume that is the correct answer.) I then added show my cost basis, but didn't list any number of shares as sold, as they remain in escrow.

So that is a little confusing. But Turbo seems to accept it that. The capital gains were determined as the cash liquidation amount minus the cost basis. Future distributions will be 100% cap gain, and I guess will need to do the same thing.

I guess I have done it properly. Thank you for your help!

vannerpham

Hi,

I am also figuring out how to handle the AABA cash liquidation scenario.

I got a 1099-DIV form from my brokerages. Sections 1-8, and 10-15 is all $0.00. Section 9,

Cash Liquidation Distributions, is the total amount of cash I received as part of the partial liquidation.

I know my cost basis from when I bought the stock (ESPP), so how and where do I enter in the profit I made?

Hypothetically, say I had 10 shares at a cost basis of $20, and was given $50 for the partial liquidation so far.

How do I enter in the $300 profit I made so far: 10 shares x $30 ($50-$20)

Do I pay the taxes now? Or do you have to wait to pay taxes after I get the full liquidation (1 or so years from now)?

jhusmoe

I have basically the same situation and question. It is unclear to me how Turbotax handles this when the remaining final cash liquidation distribution is in 2020 but the first cash liquidation distribution in 2019 exceeds the original cost basis.

jhusmoe

Rick19744 replies have been helpful although Turbotax itself should be more clear. Again i have an initial cash liquidation distribution in 2019 reported on 1099-Div Copy B that exceeds my cost basis so there will be a gain. There will be a final liquidation distribution in 2020 that will be a gain again after the cost basis is used for 2019. I am still a little confused on whether the 2019 initial cash liquidation distribution should have been reported on the 1099-Div Copy B or some other form.

Rick19744

Employee

@jhusmoe "yes" liquidating distributions are reported on form 1099-DIV.

*A reminder that posts in a forum such as this do not constitute tax advice.Also keep in mind the date of replies, as tax law changes.

Jimmytax

I filed my taxes with the assumption that the liquidation distribution would be handled by TurboTax in the investment income section as the software noted it would. The cash liquidation distribution was reported correctly on Schedule B Box 9. However, my assumption that Turbo Tax accounted for the cost basis and relating gains, or would prompt a question was incorrect. There was never any follow up in the investment income section. The software clearly just ignores the cash liquidation distribution.

The liquidation distribution cost basis was not reported to the IRS - going from Yahoo (YHOO) to Altaba (AABA) and other name changes likely complicated the issue, but I can see that the basis is not being reported.

I had approximately $20K basis and the liquidating distribution was approximately $30K, so it would appear I should report the $10K gain, presumably as a long-term capital gain? Additionally, future distributions would be handled as gains as there will be no basis left, is this correct? At this point, I would surmise that I will have to amend my return to report this $10K capital gain, is this correct? Or, could I wait until the final liquidation distributions are made and report the entire gain at that point in time?

It seems that TurboTax should fix this issue as I have traditionally had good luck importing my investment data directly from my broker and TurboTax handled it correctly, or at least would alert to the fact that something else needs to be done. In this case, I only spotted it after I submitted my return, which is unfortunate.

Thanks

KathrynG3

Please see answers to your questions below:

1. "I had approximately $20K basis and the liquidating distribution was approximately $30K, so it would appear I should report the $10K gain, presumably as a long-term capital gain?"

It depends. If these assets were held for longer than one year, yes, the liquidation would be reported as a long-term capital gain.

2. Additionally, future distributions would be handled as gains as there will be no basis left, is this correct?

Yes

3. At this point, I would surmise that I will have to amend my return to report this $10K capital gain, is this correct?

Yes, you will need to amend the return. Click the link for details: How do I amend my return? The amendment will affect any state filing, as well.

4. Or, could I wait until the final liquidation distributions are made and report the entire gain at that point in time?

It depends. The transactions must be reported on a cash basis when the assets are actually sold.

Please see TurboTax Employee Tax Expert ThomasM125's answer to this Community question: Handle liquidation distribution

@Jimmytax

dskroback

Under 1099-DIV i have a 12,360 liquid distribution. I don't know what the original buying amount was or when. Do I need to include this in stock sales? If so, where?

ThomasM125

The liquidating distribution would only be taxable and reported on your tax return if it exceeds your basis in the investment.

Your basis is basically your original investment, plus additional money your contributed, plus your share of income from the investment, less losses, less distributions in prior years.

If you determine that your distributions exceeded your basis, you would need to report a sale of investment in TurboTax as follows to report the capital gain realized:

1. Find the "Income and Expenses" menu option in your TurboTax program

2. Find "Investment Income" in the list of categories

3. Click on "Stocks, Mutual Funds, Bonds and Other"

4. Work through the program to find "Choose the type of Investment you Sold"

5. Choose the "Everything Else" option in the list of investments

6. Enter the information requested about your sale (date purchased, sale amount, cost, etc)

The sale amount would be the taxable gain and the cost basis would be zero (-0-).

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balindo22

One year later, this is happening again.

Anybody knows if Turbo is going to fix it?

PattiF

In order to enter the information in Box 9 of the 1099-DIV which has information on a complete cash liquidation distribution without a 1099-B, you need to take the following steps:

In Personal Income Go to Investment Income
Click on Stocks, Mutual Funds, Bonds, Other
Then Add More Sales
Did you get a 1099-B or a brokerage statement for these sales?
Enter No
Then I'll enter one sale at a time under Tell us about this sale
Now enter the 'sale' of the liquidated investment using the box 9 amount as the proceeds received for the sale.
You will have to enter your basis in the investment

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TaxNoob18

pattif12,

You said "In order to enter the information in Box 9 of the 1099-DIV which has information on a complete cash liquidation distribution without a 1099-B"

This isn't a complete liquidation. It's partial liquidation without 1099-B. There will be another distribution this year (2021) of unknown amount. In my case, I've received 2 distributions (in 2019 and 2020) and the total amount I receive is still lower than my basis by a couple of hundred dollars. It is still a loss as of now.

How do we report partial liquidation?

Cono Emanuele

How do you report this on the Form 8948? I am not able to do this

DianeW777

You don't have to manually complete Form 8949. When you make your entry in TurboTax, it will flow to Form 8949 if necessary. Follow the steps in the link below for entering your investment sale.

Where is Form 8949?
Search (upper right) > type schedule d > use the Jump to... link select 'Review' on Personal items sale (Form 1099-K) > follow the prompts to complete the cost entry
- Where do I enter investment sales?

@Cono Emanuele

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