We'll handle your cash liquidation distribution later ... and then "We" never do anything.

Forum|Forum|2 years ago
February 17, 2024
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My 1099-DIV has an amount in Box 9 Cash Liquidation Distributions that was entered into TurboTax.

TurboTax said: "We'll handle your cash liquidation distribution later"

But it never did.

TurboTax also said: "Just remember to go to the Investment Income section under Wages & Income."

But it never did anything to tell the user how to handle the entry.

If I have to manually have to keep track of these reminders, and go off and figure it out how to handle it on my own, and manually enter the values, and manually keep track of my basis, why am I paying TurboTax to help me do my Taxes?

This issue has popped up on the Community Forum for years apparently but Intuit has no incentive to actually resolve the issue. Perhaps a visit from the IRS, FTC, Attorney General or Governor will provide the nudge that is needed.

DianeW777

TurboTax does not know if you still have a cost basis in the distributions. It's a record keeping that must be done by the owners of the stock.

Liquidating distributions, sometimes called liquidating dividends, are distributions you receive during a partial or complete liquidation of a corporation. These distributions are, at least in part, one form of a return of capital. They may be paid in one or more installments. You will receive Form 1099-DIV from the corporation showing you the amount of the liquidating distribution in box 8 and/or 9.

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.

If you are still recovering your cost basis here are the records to keep.

Records to keep: (Required as routine for any dividends and investment purchases)

The amounts you paid for this investment from the beginning until all liquidation payments have been received. This would include any reinvested dividends, if applicable.
Total amount of shares purchased at each purchase date
Total of any prior year (before liquidation) return of capital dividends / nontaxable distributions (shown on Form 1099-DIV)
Forms 1099-DIV or all years as proof of any return of capital / nontaxable distributions

These records may be needed until three years after the final liquidation is paid out. If and when you receive liquidating distributions that exceed your cost basis only then do you have a reportable tax sale transaction.

If you have recovered your cost basis and now need to report capital gains use the information at this link. You will have 'sale proceeds' but zero cost basis. The sales proceeds will be any part of the liquidating distribution that is in excess of your original cost basis.