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File Taxes 2009

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File Taxes 2009

File taxes 2009 8. File taxes 2009   Dividends and Other Distributions Table of Contents Reminder Introduction Useful Items - You may want to see: General InformationDividends not reported on Form 1099-DIV. File taxes 2009 Reporting tax withheld. File taxes 2009 Nominees. File taxes 2009 Ordinary DividendsQualified Dividends Dividends Used to Buy More Stock Money Market Funds Capital Gain DistributionsBasis adjustment. File taxes 2009 Nondividend DistributionsLiquidating Distributions Distributions of Stock and Stock Rights Other DistributionsInformation reporting requirement. File taxes 2009 Alternative minimum tax treatment. File taxes 2009 How To Report Dividend IncomeInvestment interest deducted. File taxes 2009 Reminder Foreign-source income. File taxes 2009  If you are a U. File taxes 2009 S. File taxes 2009 citizen with dividend income from sources outside the United States (foreign-source income), you must report that income on your tax return unless it is exempt by U. File taxes 2009 S. File taxes 2009 law. File taxes 2009 This is true whether you reside inside or outside the United States and whether or not you receive a Form 1099 from the foreign payer. File taxes 2009 Introduction This chapter discusses the tax treatment of: Ordinary dividends, Capital gain distributions, Nondividend distributions, and Other distributions you may receive from a corporation or a mutual fund. File taxes 2009 This chapter also explains how to report dividend income on your tax return. File taxes 2009 Dividends are distributions of money, stock, or other property paid to you by a corporation or by a mutual fund. File taxes 2009 You also may receive dividends through a partnership, an estate, a trust, or an association that is taxed as a corporation. File taxes 2009 However, some amounts you receive that are called dividends are actually interest income. File taxes 2009 (See Dividends that are actually interest under Taxable Interest in chapter 7. File taxes 2009 ) Most distributions are paid in cash (or check). File taxes 2009 However, distributions can consist of more stock, stock rights, other property, or services. File taxes 2009 Useful Items - You may want to see: Publication 514 Foreign Tax Credit for Individuals 550 Investment Income and Expenses Form (and Instructions) Schedule B (Form 1040A or 1040) Interest and Ordinary Dividends General Information This section discusses general rules for dividend income. File taxes 2009 Tax on unearned income of certain children. File taxes 2009   Part of a child's 2013 unearned income may be taxed at the parent's tax rate. File taxes 2009 If it is, Form 8615, Tax for Certain Children Who Have Unearned Income, must be completed and attached to the child's tax return. File taxes 2009 If not, Form 8615 is not required and the child's income is taxed at his or her own tax rate. File taxes 2009    Some parents can choose to include the child's interest and dividends on the parent's return if certain requirements are met. File taxes 2009 Use Form 8814, Parents' Election To Report Child's Interest and Dividends, for this purpose. File taxes 2009   For more information about the tax on unearned income of children and the parents' election, see chapter 31. File taxes 2009 Beneficiary of an estate or trust. File taxes 2009    Dividends and other distributions you receive as a beneficiary of an estate or trust are generally taxable income. File taxes 2009 You should receive a Schedule K-1 (Form 1041), Beneficiary's Share of Income, Deductions, Credits, etc. File taxes 2009 , from the fiduciary. File taxes 2009 Your copy of Schedule K-1 (Form 1041) and its instructions will tell you where to report the income on your Form 1040. File taxes 2009 Social security number (SSN) or individual taxpayer identification number (ITIN). File taxes 2009    You must give your SSN or ITIN to any person required by federal tax law to make a return, statement, or other document that relates to you. File taxes 2009 This includes payers of dividends. File taxes 2009 If you do not give your SSN or ITIN to the payer of dividends, you may have to pay a penalty. File taxes 2009 For more information on SSNs and ITINs, see Social Security Number (SSN) in chapter 1. File taxes 2009 Backup withholding. File taxes 2009   Your dividend income is generally not subject to regular withholding. File taxes 2009 However, it may be subject to backup withholding to ensure that income tax is collected on the income. File taxes 2009 Under backup withholding, the payer of dividends must withhold, as income tax, on the amount you are paid, applying the appropriate withholding rate. File taxes 2009   Backup withholding may also be required if the IRS has determined that you underreported your interest or dividend income. File taxes 2009 For more information, see Backup Withholding in chapter 4. File taxes 2009 Stock certificate in two or more names. File taxes 2009   If two or more persons hold stock as joint tenants, tenants by the entirety, or tenants in common, each person's share of any dividends from the stock is determined by local law. File taxes 2009 Form 1099-DIV. File taxes 2009   Most corporations and mutual funds use Form 1099-DIV, Dividends and Distributions, to show you the distributions you received from them during the year. File taxes 2009 Keep this form with your records. File taxes 2009 You do not have to attach it to your tax return. File taxes 2009 Dividends not reported on Form 1099-DIV. File taxes 2009   Even if you do not receive Form 1099-DIV, you must still report all your taxable dividend income. File taxes 2009 For example, you may receive distributive shares of dividends from partnerships or S corporations. File taxes 2009 These dividends are reported to you on Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. File taxes 2009 , and Schedule K-1 (Form 1120S), Shareholder's Share of Income, Deductions, Credits, etc. File taxes 2009 Reporting tax withheld. File taxes 2009   If tax is withheld from your dividend income, the payer must give you a Form 1099-DIV that indicates the amount withheld. File taxes 2009 Nominees. File taxes 2009   If someone receives distributions as a nominee for you, that person should give you a Form 1099-DIV, which will show distributions received on your behalf. File taxes 2009 Form 1099-MISC. File taxes 2009   Certain substitute payments in lieu of dividends or tax-exempt interest received by a broker on your behalf must be reported to you on Form 1099-MISC, Miscellaneous Income, or a similar statement. File taxes 2009 See Reporting Substitute Payments under Short Sales in chapter 4 of Publication 550 for more information about reporting these payments. File taxes 2009 Incorrect amount shown on a Form 1099. File taxes 2009   If you receive a Form 1099 that shows an incorrect amount (or other incorrect information), you should ask the issuer for a corrected form. File taxes 2009 The new Form 1099 you receive will be marked “Corrected. File taxes 2009 ” Dividends on stock sold. File taxes 2009   If stock is sold, exchanged, or otherwise disposed of after a dividend is declared but before it is paid, the owner of record (usually the payee shown on the dividend check) must include the dividend in income. File taxes 2009 Dividends received in January. File taxes 2009   If a mutual fund (or other regulated investment company) or real estate investment trust (REIT) declares a dividend (including any exempt-interest dividend or capital gain distribution) in October, November, or December, payable to shareholders of record on a date in one of those months but actually pays the dividend during January of the next calendar year, you are considered to have received the dividend on December 31. File taxes 2009 You report the dividend in the year it was declared. File taxes 2009 Ordinary Dividends Ordinary (taxable) dividends are the most common type of distribution from a corporation or a mutual fund. File taxes 2009 They are paid out of earnings and profits and are ordinary income to you. File taxes 2009 This means they are not capital gains. File taxes 2009 You can assume that any dividend you receive on common or preferred stock is an ordinary dividend unless the paying corporation or mutual fund tells you otherwise. File taxes 2009 Ordinary dividends will be shown in box 1a of the Form 1099-DIV you receive. File taxes 2009 Qualified Dividends Qualified dividends are the ordinary dividends subject to the same 0%, 15%, or 20% maximum tax rate that applies to net capital gain. File taxes 2009 They should be shown in box 1b of the Form 1099-DIV you receive. File taxes 2009 The maximum rate of tax on qualified dividends is: 0% on any amount that otherwise would be taxed at a 10% or 15% rate. File taxes 2009 15% on any amount that otherwise would be taxed at rates greater than 15% but less than 39. File taxes 2009 6%. File taxes 2009 20% on any amount that otherwise would be taxed at a 39. File taxes 2009 6% rate. File taxes 2009 To qualify for the maximum rate, all of the following requirements must be met. File taxes 2009 The dividends must have been paid by a U. File taxes 2009 S. File taxes 2009 corporation or a qualified foreign corporation. File taxes 2009 (See Qualified foreign corporation , later. File taxes 2009 ) The dividends are not of the type listed later under Dividends that are not qualified dividends . File taxes 2009 You meet the holding period (discussed next). File taxes 2009 Holding period. File taxes 2009   You must have held the stock for more than 60 days during the 121-day period that begins 60 days before the ex-dividend date. File taxes 2009 The ex-dividend date is the first date following the declaration of a dividend on which the buyer of a stock is not entitled to receive the next dividend payment. File taxes 2009 Instead, the seller will get the dividend. File taxes 2009   When counting the number of days you held the stock, include the day you disposed of the stock, but not the day you acquired it. File taxes 2009 See the examples later. File taxes 2009 Exception for preferred stock. File taxes 2009   In the case of preferred stock, you must have held the stock more than 90 days during the 181-day period that begins 90 days before the ex-dividend date if the dividends are due to periods totaling more than 366 days. File taxes 2009 If the preferred dividends are due to periods totaling less than 367 days, the holding period in the previous paragraph applies. File taxes 2009 Example 1. File taxes 2009 You bought 5,000 shares of XYZ Corp. File taxes 2009 common stock on July 9, 2013. File taxes 2009 XYZ Corp. File taxes 2009 paid a cash dividend of 10 cents per share. File taxes 2009 The ex-dividend date was July 16, 2013. File taxes 2009 Your Form 1099-DIV from XYZ Corp. File taxes 2009 shows $500 in box 1a (ordinary dividends) and in box 1b (qualified dividends). File taxes 2009 However, you sold the 5,000 shares on August 12, 2013. File taxes 2009 You held your shares of XYZ Corp. File taxes 2009 for only 34 days of the 121-day period (from July 10, 2013, through August 12, 2013). File taxes 2009 The 121-day period began on May 17, 2013 (60 days before the ex-dividend date), and ended on September 14, 2013. File taxes 2009 You have no qualified dividends from XYZ Corp. File taxes 2009 because you held the XYZ stock for less than 61 days. File taxes 2009 Example 2. File taxes 2009 Assume the same facts as in Example 1 except that you bought the stock on July 15, 2013 (the day before the ex-dividend date), and you sold the stock on September 16, 2013. File taxes 2009 You held the stock for 63 days (from July 16, 2013, through September 16, 2013). File taxes 2009 The $500 of qualified dividends shown in box 1b of your Form 1099-DIV are all qualified dividends because you held the stock for 61 days of the 121-day period (from July 16, 2013, through September 14, 2013). File taxes 2009 Example 3. File taxes 2009 You bought 10,000 shares of ABC Mutual Fund common stock on July 9, 2013. File taxes 2009 ABC Mutual Fund paid a cash dividend of 10 cents a share. File taxes 2009 The ex-dividend date was July 16, 2013. File taxes 2009 The ABC Mutual Fund advises you that the portion of the dividend eligible to be treated as qualified dividends equals 2 cents per share. File taxes 2009 Your Form 1099-DIV from ABC Mutual Fund shows total ordinary dividends of $1,000 and qualified dividends of $200. File taxes 2009 However, you sold the 10,000 shares on August 12, 2013. File taxes 2009 You have no qualified dividends from ABC Mutual Fund because you held the ABC Mutual Fund stock for less than 61 days. File taxes 2009 Holding period reduced where risk of loss is diminished. File taxes 2009   When determining whether you met the minimum holding period discussed earlier, you cannot count any day during which you meet any of the following conditions. File taxes 2009 You had an option to sell, were under a contractual obligation to sell, or had made (and not closed) a short sale of substantially identical stock or securities. File taxes 2009 You were grantor (writer) of an option to buy substantially identical stock or securities. File taxes 2009 Your risk of loss is diminished by holding one or more other positions in substantially similar or related property. File taxes 2009   For information about how to apply condition (3), see Regulations section 1. File taxes 2009 246-5. File taxes 2009 Qualified foreign corporation. File taxes 2009   A foreign corporation is a qualified foreign corporation if it meets any of the following conditions. File taxes 2009 The corporation is incorporated in a U. File taxes 2009 S. File taxes 2009 possession. File taxes 2009 The corporation is eligible for the benefits of a comprehensive income tax treaty with the United States that the Treasury Department determines is satisfactory for this purpose and that includes an exchange of information program. File taxes 2009 For a list of those treaties, see Table 8-1. File taxes 2009 The corporation does not meet (1) or (2) above, but the stock for which the dividend is paid is readily tradable on an established securities market in the United States. File taxes 2009 See Readily tradable stock , later. File taxes 2009 Exception. File taxes 2009   A corporation is not a qualified foreign corporation if it is a passive foreign investment company during its tax year in which the dividends are paid or during its previous tax year. File taxes 2009 Readily tradable stock. File taxes 2009   Any stock (such as common, ordinary, or preferred) or an American depositary receipt in respect of that stock is considered to satisfy requirement (3) under Qualified foreign corporation , if it is listed on a national securities exchange that is registered under section 6 of the Securities Exchange Act of 1934 or on the Nasdaq Stock Market. File taxes 2009 For a list of the exchanges that meet these requirements, see www. File taxes 2009 sec. File taxes 2009 gov/divisions/marketreg/mrexchanges. File taxes 2009 shtml. File taxes 2009 Dividends that are not qualified dividends. File taxes 2009   The following dividends are not qualified dividends. File taxes 2009 They are not qualified dividends even if they are shown in box 1b of Form 1099-DIV. File taxes 2009 Capital gain distributions. File taxes 2009 Dividends paid on deposits with mutual savings banks, cooperative banks, credit unions, U. File taxes 2009 S. File taxes 2009 building and loan associations, U. File taxes 2009 S. File taxes 2009 savings and loan associations, federal savings and loan associations, and similar financial institutions. File taxes 2009 (Report these amounts as interest income. File taxes 2009 ) Dividends from a corporation that is a tax-exempt organization or farmer's cooperative during the corporation's tax year in which the dividends were paid or during the corporation's previous tax year. File taxes 2009 Dividends paid by a corporation on employer securities held on the date of record by an employee stock ownership plan (ESOP) maintained by that corporation. File taxes 2009 Dividends on any share of stock to the extent you are obligated (whether under a short sale or otherwise) to make related payments for positions in substantially similar or related property. File taxes 2009 Payments in lieu of dividends, but only if you know or have reason to know the payments are not qualified dividends. File taxes 2009 Payments shown in Form 1099-DIV, box 1b, from a foreign corporation to the extent you know or have reason to know the payments are not qualified dividends. File taxes 2009 Table 8-1. File taxes 2009 Income Tax Treaties Income tax treaties the United States has with the following countries satisfy requirement (2) under Qualified foreign corporation. File taxes 2009 Australia Indonesia Romania Austria Ireland Russian Bangladesh Israel Federation Barbados Italy Slovak Belgium Jamaica Republic Bulgaria Japan Slovenia Canada Kazakhstan South Africa China Korea Spain Cyprus Latvia Sri Lanka Czech Lithuania Sweden Republic Luxembourg Switzerland Denmark Malta Thailand Egypt Mexico Trinidad and Estonia Morocco Tobago Finland Netherlands Tunisia France New Zealand Turkey Germany Norway Ukraine Greece Pakistan United Hungary Philippines Kingdom Iceland Poland Venezuela India Portugal     Dividends Used to Buy More Stock The corporation in which you own stock may have a dividend reinvestment plan. File taxes 2009 This plan lets you choose to use your dividends to buy (through an agent) more shares of stock in the corporation instead of receiving the dividends in cash. File taxes 2009 Most mutual funds also permit shareholders to automatically reinvest distributions in more shares in the fund, instead of receiving cash. File taxes 2009 If you use your dividends to buy more stock at a price equal to its fair market value, you still must report the dividends as income. File taxes 2009 If you are a member of a dividend reinvestment plan that lets you buy more stock at a price less than its fair market value, you must report as dividend income the fair market value of the additional stock on the dividend payment date. File taxes 2009 You also must report as dividend income any service charge subtracted from your cash dividends before the dividends are used to buy the additional stock. File taxes 2009 But you may be able to deduct the service charge. File taxes 2009 See chapter 28 for more information about deducting expenses of producing income. File taxes 2009 In some dividend reinvestment plans, you can invest more cash to buy shares of stock at a price less than fair market value. File taxes 2009 If you choose to do this, you must report as dividend income the difference between the cash you invest and the fair market value of the stock you buy. File taxes 2009 When figuring this amount, use the fair market value of the stock on the dividend payment date. File taxes 2009 Money Market Funds Report amounts you receive from money market funds as dividend income. File taxes 2009 Money market funds are a type of mutual fund and should not be confused with bank money market accounts that pay interest. File taxes 2009 Capital Gain Distributions Capital gain distributions (also called capital gain dividends) are paid to you or credited to your account by mutual funds (or other regulated investment companies) and real estate investment trusts (REITs). File taxes 2009 They will be shown in box 2a of the Form 1099-DIV you receive from the mutual fund or REIT. File taxes 2009 Report capital gain distributions as long-term capital gains, regardless of how long you owned your shares in the mutual fund or REIT. File taxes 2009 Undistributed capital gains of mutual funds and REITs. File taxes 2009    Some mutual funds and REITs keep their long-term capital gains and pay tax on them. File taxes 2009 You must treat your share of these gains as distributions, even though you did not actually receive them. File taxes 2009 However, they are not included on Form 1099-DIV. File taxes 2009 Instead, they are reported to you in box 1a of Form 2439. File taxes 2009   Report undistributed capital gains (box 1a of Form 2439) as long-term capital gains on Schedule D (Form 1040), column (h), line 11. File taxes 2009   The tax paid on these gains by the mutual fund or REIT is shown in box 2 of Form 2439. File taxes 2009 You take credit for this tax by including it on Form 1040, line 71, and checking box a on that line. File taxes 2009 Attach Copy B of Form 2439 to your return, and keep Copy C for your records. File taxes 2009 Basis adjustment. File taxes 2009   Increase your basis in your mutual fund, or your interest in a REIT, by the difference between the gain you report and the credit you claim for the tax paid. File taxes 2009 Additional information. File taxes 2009   For more information on the treatment of distributions from mutual funds, see Publication 550. File taxes 2009 Nondividend Distributions A nondividend distribution is a distribution that is not paid out of the earnings and profits of a corporation or a mutual fund. File taxes 2009 You should receive a Form 1099-DIV or other statement showing the nondividend distribution. File taxes 2009 On Form 1099-DIV, a nondividend distribution will be shown in box 3. File taxes 2009 If you do not receive such a statement, you report the distribution as an ordinary dividend. File taxes 2009 Basis adjustment. File taxes 2009   A nondividend distribution reduces the basis of your stock. File taxes 2009 It is not taxed until your basis in the stock is fully recovered. File taxes 2009 This nontaxable portion is also called a return of capital; it is a return of your investment in the stock of the company. File taxes 2009 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. File taxes 2009   When the basis of your stock has been reduced to zero, report any additional nondividend distribution you receive as a capital gain. File taxes 2009 Whether you report it as a long-term or short-term capital gain depends on how long you have held the stock. File taxes 2009 See Holding Period in chapter 14. File taxes 2009 Example. File taxes 2009 You bought stock in 2000 for $100. File taxes 2009 In 2003, you received a nondividend distribution of $80. File taxes 2009 You did not include this amount in your income, but you reduced the basis of your stock to $20. File taxes 2009 You received a nondividend distribution of $30 in 2013. File taxes 2009 The first $20 of this amount reduced your basis to zero. File taxes 2009 You report the other $10 as a long-term capital gain for 2013. File taxes 2009 You must report as a long-term capital gain any nondividend distribution you receive on this stock in later years. File taxes 2009 Liquidating Distributions Liquidating distributions, sometimes called liquidating dividends, are distributions you receive during a partial or complete liquidation of a corporation. File taxes 2009 These distributions are, at least in part, one form of a return of capital. File taxes 2009 They may be paid in one or more installments. File taxes 2009 You will receive Form 1099-DIV from the corporation showing you the amount of the liquidating distribution in box 8 or 9. File taxes 2009 For more information on liquidating distributions, see chapter 1 of Publication 550. File taxes 2009 Distributions of Stock and Stock Rights Distributions by a corporation of its own stock are commonly known as stock dividends. File taxes 2009 Stock rights (also known as “stock options”) are distributions by a corporation of rights to acquire the corporation's stock. File taxes 2009 Generally, stock dividends and stock rights are not taxable to you, and you do not report them on your return. File taxes 2009 Taxable stock dividends and stock rights. File taxes 2009   Distributions of stock dividends and stock rights are taxable to you if any of the following apply. File taxes 2009 You or any other shareholder have the choice to receive cash or other property instead of stock or stock rights. File taxes 2009 The distribution gives cash or other property to some shareholders and an increase in the percentage interest in the corporation's assets or earnings and profits to other shareholders. File taxes 2009 The distribution is in convertible preferred stock and has the same result as in (2). File taxes 2009 The distribution gives preferred stock to some common stock shareholders and common stock to other common stock shareholders. File taxes 2009 The distribution is on preferred stock. File taxes 2009 (The distribution, however, is not taxable if it is an increase in the conversion ratio of convertible preferred stock made solely to take into account a stock dividend, stock split, or similar event that would otherwise result in reducing the conversion right. File taxes 2009 )   The term “stock” includes rights to acquire stock, and the term “shareholder” includes a holder of rights or of convertible securities. File taxes 2009 If you receive taxable stock dividends or stock rights, include their fair market value at the time of distribution in your income. File taxes 2009 Preferred stock redeemable at a premium. File taxes 2009   If you hold preferred stock having a redemption price higher than its issue price, the difference (the redemption premium) generally is taxable as a constructive distribution of additional stock on the preferred stock. File taxes 2009 For more information, see chapter 1 of Publication 550. File taxes 2009 Basis. File taxes 2009   Your basis in stock or stock rights received in a taxable distribution is their fair market value when distributed. File taxes 2009 If you receive stock or stock rights that are not taxable to you, see Stocks and Bonds under Basis of Investment Property in chapter 4 of Publication 550 for information on how to figure their basis. File taxes 2009 Fractional shares. File taxes 2009    You may not own enough stock in a corporation to receive a full share of stock if the corporation declares a stock dividend. File taxes 2009 However, with the approval of the shareholders, the corporation may set up a plan in which fractional shares are not issued but instead are sold, and the cash proceeds are given to the shareholders. File taxes 2009 Any cash you receive for fractional shares under such a plan is treated as an amount realized on the sale of the fractional shares. File taxes 2009 Report this transaction on Form 8949, Sales and Other Dispositions of Capital Assets. File taxes 2009 Enter your gain or loss, the difference between the cash you receive and the basis of the fractional shares sold, in column (h) of Schedule D (Form 1040) in Part I or Part II, whichever is appropriate. File taxes 2009    Report these transactions on Form 8949 with the correct box checked. File taxes 2009   For more information on Form 8949 and Schedule D (Form 1040), see chapter 4 of Publication 550. File taxes 2009 Also see the Instructions for Form 8949 and the Instructions for Schedule D (Form 1040). File taxes 2009 Example. File taxes 2009 You own one share of common stock that you bought on January 3, 2004, for $100. File taxes 2009 The corporation declared a common stock dividend of 5% on June 29, 2013. File taxes 2009 The fair market value of the stock at the time the stock dividend was declared was $200. File taxes 2009 You were paid $10 for the fractional-share stock dividend under a plan described in the discussion above. File taxes 2009 You figure your gain or loss as follows: Fair market value of old stock $200. File taxes 2009 00 Fair market value of stock dividend (cash received) +10. File taxes 2009 00 Fair market value of old stock and stock dividend $210. File taxes 2009 00 Basis (cost) of old stock after the stock dividend (($200 ÷ $210) × $100) $95. File taxes 2009 24 Basis (cost) of stock dividend (($10 ÷ $210) × $100) + 4. File taxes 2009 76 Total $100. File taxes 2009 00 Cash received $10. File taxes 2009 00 Basis (cost) of stock dividend − 4. File taxes 2009 76 Gain $5. File taxes 2009 24 Because you had held the share of stock for more than 1 year at the time the stock dividend was declared, your gain on the stock dividend is a long-term capital gain. File taxes 2009 Scrip dividends. File taxes 2009   A corporation that declares a stock dividend may issue you a scrip certificate that entitles you to a fractional share. File taxes 2009 The certificate is generally nontaxable when you receive it. File taxes 2009 If you choose to have the corporation sell the certificate for you and give you the proceeds, your gain or loss is the difference between the proceeds and the portion of your basis in the corporation's stock allocated to the certificate. File taxes 2009   However, if you receive a scrip certificate that you can choose to redeem for cash instead of stock, the certificate is taxable when you receive it. File taxes 2009 You must include its fair market value in income on the date you receive it. File taxes 2009 Other Distributions You may receive any of the following distributions during the year. File taxes 2009 Exempt-interest dividends. File taxes 2009   Exempt-interest dividends you receive from a mutual fund or other regulated investment company, including those received from a qualified fund of funds in any tax year beginning after December 22, 2010, are not included in your taxable income. File taxes 2009 Exempt-interest dividends should be shown in box 10 of Form 1099-DIV. File taxes 2009 Information reporting requirement. File taxes 2009   Although exempt-interest dividends are not taxable, you must show them on your tax return if you have to file a return. File taxes 2009 This is an information reporting requirement and does not change the exempt-interest dividends to taxable income. File taxes 2009 Alternative minimum tax treatment. File taxes 2009   Exempt-interest dividends paid from specified private activity bonds may be subject to the alternative minimum tax. File taxes 2009 See Alternative Minimum Tax (AMT) in chapter 30 for more information. File taxes 2009 Dividends on insurance policies. File taxes 2009    Insurance policy dividends the insurer keeps and uses to pay your premiums are not taxable. File taxes 2009 However, you must report as taxable interest income the interest that is paid or credited on dividends left with the insurance company. File taxes 2009    If dividends on an insurance contract (other than a modified endowment contract) are distributed to you, they are a partial return of the premiums you paid. File taxes 2009 Do not include them in your gross income until they are more than the total of all net premiums you paid for the contract. File taxes 2009 Report any taxable distributions on insurance policies on Form 1040, line 21. File taxes 2009 Dividends on veterans' insurance. File taxes 2009   Dividends you receive on veterans' insurance policies are not taxable. File taxes 2009 In addition, interest on dividends left with the Department of Veterans Affairs is not taxable. File taxes 2009 Patronage dividends. File taxes 2009   Generally, patronage dividends you receive in money from a cooperative organization are included in your income. File taxes 2009   Do not include in your income patronage dividends you receive on: Property bought for your personal use, or Capital assets or depreciable property bought for use in your business. File taxes 2009 But you must reduce the basis (cost) of the items bought. File taxes 2009 If the dividend is more than the adjusted basis of the assets, you must report the excess as income. File taxes 2009   These rules are the same whether the cooperative paying the dividend is a taxable or tax-exempt cooperative. File taxes 2009 Alaska Permanent Fund dividends. File taxes 2009    Do not report these amounts as dividends. File taxes 2009 Instead, report these amounts on Form 1040, line 21; Form 1040A, line 13; or Form 1040EZ, line 3. File taxes 2009 How To Report Dividend Income Generally, you can use either Form 1040 or Form 1040A to report your dividend income. File taxes 2009 Report the total of your ordinary dividends on line 9a of Form 1040 or Form 1040A. File taxes 2009 Report qualified dividends on line 9b of Form 1040 or Form 1040A. File taxes 2009 If you receive capital gain distributions, you may be able to use Form 1040A or you may have to use Form 1040. File taxes 2009 See Exceptions to filing Form 8949 and Schedule D (Form 1040) in chapter 16. File taxes 2009 If you receive nondividend distributions required to be reported as capital gains, you must use Form 1040. File taxes 2009 You cannot use Form 1040EZ if you receive any dividend income. File taxes 2009 Form 1099-DIV. File taxes 2009   If you owned stock on which you received $10 or more in dividends and other distributions, you should receive a Form 1099-DIV. File taxes 2009 Even if you do not receive Form 1099-DIV, you must report all your dividend income. File taxes 2009   See Form 1099-DIV for more information on how to report dividend income. File taxes 2009 Form 1040A or 1040. File taxes 2009    You must complete Schedule B (Form 1040A or 1040), Part II, and attach it to your Form 1040A or 1040, if: Your ordinary dividends (Form 1099-DIV, box 1a) are more than $1,500, or You received, as a nominee, dividends that actually belong to someone else. File taxes 2009 If your ordinary dividends are more than $1,500, you must also complete Schedule B (Form 1040A or 1040), Part III. File taxes 2009   List on Schedule B (Form 1040A or 1040), Part II, line 5, each payer's name and the ordinary dividends you received. File taxes 2009 If your securities are held by a brokerage firm (in “street name”), list the name of the brokerage firm shown on Form 1099-DIV as the payer. File taxes 2009 If your stock is held by a nominee who is the owner of record, and the nominee credited or paid you dividends on the stock, show the name of the nominee and the dividends you received or for which you were credited. File taxes 2009   Enter on line 6 the total of the amounts listed on line 5. File taxes 2009 Also enter this total on line 9a of Form 1040A or 1040. File taxes 2009 Qualified dividends. File taxes 2009   Report qualified dividends (Form 1099-DIV, box 1b) on line 9b of Form 1040 or Form 1040A. File taxes 2009 The amount in box 1b is already included in box 1a. File taxes 2009 Do not add the amount in box 1b to, or substract it from, the amount in box 1a. File taxes 2009   Do not include any of the following on line 9b. File taxes 2009 Qualified dividends you received as a nominee. File taxes 2009 See Nominees under How to Report Dividend Income in chapter 1 of Publication 550. File taxes 2009 Dividends on stock for which you did not meet the holding period. File taxes 2009 See Holding period , earlier under Qualified Dividends. File taxes 2009 Dividends on any share of stock to the extent you are obligated (whether under a short sale or otherwise) to make related payments for positions in substantially similar or related property. File taxes 2009 Payments in lieu of dividends, but only if you know or have reason to know the payments are not qualified dividends. File taxes 2009 Payments shown in Form 1099-DIV, box 1b, from a foreign corporation to the extent you know or have reason to know the payments are not qualified dividends. File taxes 2009   If you have qualified dividends, you must figure your tax by completing the Qualified Dividends and Capital Gain Tax Worksheet in the Form 1040 or 1040A instructions or the Schedule D Tax Worksheet in the Schedule D (Form 1040) instructions, whichever applies. File taxes 2009 Enter qualified dividends on line 2 of the worksheet. File taxes 2009 Investment interest deducted. File taxes 2009   If you claim a deduction for investment interest, you may have to reduce the amount of your qualified dividends that are eligible for the 0%, 15%, or 20% tax rate. File taxes 2009 Reduce it by the qualified dividends you choose to include in investment income when figuring the limit on your investment interest deduction. File taxes 2009 This is done on the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet. File taxes 2009 For more information about the limit on investment interest, see Investment expenses in chapter 23. File taxes 2009 Expenses related to dividend income. File taxes 2009   You may be able to deduct expenses related to dividend income if you itemize your deductions on Schedule A (Form 1040). File taxes 2009 See chapter 28 for general information about deducting expenses of producing income. File taxes 2009 More information. File taxes 2009    For more information about how to report dividend income, see chapter 1 of Publication 550 or the instructions for the form you must file. File taxes 2009 Prev  Up  Next   Home   More Online Publications
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File taxes 2009 3. File taxes 2009   Abandonments Table of Contents You abandon property when you voluntarily and permanently give up possession and use of the property with the intention of ending your ownership but without passing it on to anyone else. File taxes 2009 Whether an abandonment has occurred is determined in light of all the facts and circumstances. File taxes 2009 You must both show an intention to abandon the property and affirmatively act to abandon the property. File taxes 2009 A voluntary conveyance of the property in lieu of foreclosure is not an abandonment and is treated as the exchange of property to satisfy a debt. File taxes 2009 For more information, see Sales and Exchanges in Publication 544. File taxes 2009 The tax consequences of abandonment of property that secures a debt depend on whether you were personally liable for the debt (recourse debt) or were not personally liable for the debt (nonrecourse debt). File taxes 2009 See Publication 544 if you abandoned property that did not secure debt. File taxes 2009 This publication only discusses the tax consequences of abandoning property that secured a debt. File taxes 2009 Abandonment of property securing recourse debt. File taxes 2009    In most cases, if you abandon property that secures debt for which you are personally liable (recourse debt), you do not have gain or loss until the later foreclosure is completed. File taxes 2009 For details on figuring gain or loss on the foreclosure, see chapter 2. File taxes 2009 Example 1—abandonment of personal-use property securing recourse debt. File taxes 2009 In 2009, Anne purchased a home for $200,000. File taxes 2009 She borrowed the entire purchase price, for which she was personally liable, and gave the bank a mortgage on the home. File taxes 2009 In 2013, Anne lost her job and was unable to continue making her mortgage loan payments. File taxes 2009 Because her mortgage loan balance was $185,000 and the FMV of her home was only $150,000, Anne decided to abandon her home by permanently moving out on August 1, 2013. File taxes 2009 Because Anne was personally liable for the debt and the bank did not complete a foreclosure of the property in 2013, Anne has neither gain nor loss in tax year 2013 from abandoning the home. File taxes 2009 If the bank sells the house at a foreclosure sale in 2014, Anne will have to figure her gain or nondeductible loss for tax year 2014 as discussed earlier in chapter 2. File taxes 2009 Example 2—abandonment of business or investment property securing recourse debt. File taxes 2009 In 2009, Sue purchased business property for $200,000. File taxes 2009 She borrowed the entire purchase price, for which she was personally liable, and gave the lender a security interest in the property. File taxes 2009 In 2013, Sue was unable to continue making her loan payments. File taxes 2009 Because her loan balance was $185,000 and the FMV of the property was only $150,000, Sue abandoned the property on August 1, 2013. File taxes 2009 Because Sue was personally liable for the debt and the lender did not complete a foreclosure of the property in 2013, Sue has neither gain nor loss in tax year 2013 from abandoning the property. File taxes 2009 If the lender sells the property at a foreclosure sale in 2014, Sue will have to figure her gain or deductible loss for tax year 2014 as discussed earlier in chapter 2. File taxes 2009 Abandonment of property securing nonrecourse debt. File taxes 2009    If you abandon property that secures debt for which you are not personally liable (nonrecourse debt), the abandonment is treated as a sale or exchange. File taxes 2009   The amount you realize on the abandonment of property that secured nonrecourse debt is the amount of the nonrecourse debt. File taxes 2009 If the amount you realize is more than your adjusted basis, then you have a gain. File taxes 2009 If your adjusted basis is more than the amount you realize, then you have a loss. File taxes 2009 For more information on how to figure gain and loss, see Gain or Loss from Sales or Exchanges in Publication 544. File taxes 2009   Loss from abandonment of business or investment property is deductible as a loss. File taxes 2009 The character of the loss depends on the character of the property. File taxes 2009 The amount of deductible capital loss may be limited. File taxes 2009 For more information, see Treatment of Capital Losses in Publication 544. File taxes 2009 You cannot deduct any loss from abandonment of your home or other property held for personal use. File taxes 2009 Example 1—abandonment of personal-use property securing nonrecourse debt. File taxes 2009 In 2009, Timothy purchased a home for $200,000. File taxes 2009 He borrowed the entire purchase price, for which he was not personally liable, and gave the bank a mortgage on the home. File taxes 2009 In 2013, Timothy lost his job and was unable to continue making his mortgage loan payments. File taxes 2009 Because his mortgage loan balance was $185,000 and the FMV of his home was only $150,000, Timothy decided to abandon his home by permanently moving out on August 1, 2013. File taxes 2009 Because Timothy was not personally liable for the debt, the abandonment is treated as a sale or exchange of the home in tax year 2013. File taxes 2009 Timothy's amount realized is $185,000 and his adjusted basis in the home is $200,000. File taxes 2009 Timothy has a $15,000 nondeductible loss in tax year 2013. File taxes 2009 (Had Timothy’s adjusted basis been less than the amount realized, Timothy would have had a gain that he would have to include in gross income. File taxes 2009 ) The bank sells the house at a foreclosure sale in 2014. File taxes 2009 Timothy has neither gain nor loss from the foreclosure sale. File taxes 2009 Because he was not personally liable for the debt, he also has no cancellation of debt income. File taxes 2009 Example 2—abandonment of business or investment property securing nonrecourse debt. File taxes 2009 In 2009, Robert purchased business property for $200,000. File taxes 2009 He borrowed the entire purchase price, for which he was not personally liable, and gave the lender a security interest in the property. File taxes 2009 In 2013, Robert was unable to continue making his loan payments. File taxes 2009 Because his loan balance was $185,000 and the FMV of the property was only $150,000, Robert decided to abandon the property on August 1, 2013. File taxes 2009 Because Robert was not personally liable for the debt, the abandonment is treated as a sale or exchange of the property in tax year 2013. File taxes 2009 Robert's amount realized is $185,000 and his adjusted basis in the property is $180,000 (as a result of $20,000 of depreciation deductions on the property). File taxes 2009 Robert has a $5,000 gain in tax year 2013. File taxes 2009 (Had Robert’s adjusted basis been greater than the amount realized, he would have had a deductible loss. File taxes 2009 ) The lender sells the property at a foreclosure sale in 2014. File taxes 2009 Robert has neither gain nor loss from the foreclosure sale. File taxes 2009 Because he was not personally liable for the debt, he also has no cancellation of debt income. File taxes 2009 Canceled debt. File taxes 2009    If the abandoned property secures a debt for which you are personally liable and the debt is canceled, you will realize ordinary income equal to the canceled debt. File taxes 2009 This income is separate from any amount realized from abandonment of the property. File taxes 2009 You must report this income on your return unless one of the exceptions or exclusions described in chapter 1 applies. File taxes 2009 See chapter 1 for more details. File taxes 2009 Forms 1099-A and 1099-C. File taxes 2009    In most cases, if you abandon real property (such as a home), intangible property, or tangible personal property held (wholly or partly) for use in a trade or business or for investment, that secures a loan and the lender knows the property has been abandoned, the lender should send you Form 1099-A showing information you need to figure your gain or loss from the abandonment. File taxes 2009 Also, if your debt is canceled and the lender must file Form 1099-C, the lender can include the information about the abandonment on that form instead of on Form 1099-A. File taxes 2009 The lender must file Form 1099-C and send you a copy if the amount of debt canceled is $600 or more and the lender is a financial institution, credit union, federal government agency, or any organization that has a significant trade or business of lending money. File taxes 2009 For abandonments of property and debt cancellations occurring in 2013, these forms should be sent to you by January 31, 2014. File taxes 2009 Prev  Up  Next   Home   More Online Publications