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Free tax fiing Index A Accelerated death benefits, Accelerated Death Benefits, Accelerated death benefits. Free tax fiing Archer MSA, HSA, Archer MSA, or Medicare Advantage MSA, HSA, Archer MSA, or a Medicare Advantage MSA. Free tax fiing Assistance (see Tax help) Astronauts Tax forgiveness, Astronauts B Basis Inherited property, Basis of Inherited Property Joint interest property, Joint interest. Free tax fiing Qualified joint interest, Qualified joint interest. Free tax fiing Beneficiary Basis of property, Basis of Inherited Property Character of distributions, Character of Distributions Excess deductions, Excess deductions. Free tax fiing Income received, Other Items of Income Liability, estate's income tax, Liability of the beneficiary. Free tax fiing Nonresident alien, Nonresident alien beneficiary. Free tax fiing Reporting distributions, How and When To Report Successor, Successor beneficiary. Free tax fiing Treatment of distributions, Distributions to Beneficiaries Unused loss carryovers, Unused loss carryovers. Free tax fiing Bequest Defined, Bequest Property received, Gifts, Insurance, and Inheritances C Claim, credit or refund, Claim for Credit or Refund Combat zone, Combat Zone Comments, Comments and suggestions. Free tax fiing Coverdell education savings account (ESA), Coverdell Education Savings Account (ESA), Coverdell education savings account (ESA). Free tax fiing Credit Child tax, Child tax credit. Free tax fiing Earned income, Earned income credit. Free tax fiing Elderly or disabled, Credit for the elderly or the disabled. Free tax fiing Final return for decedent, Credits General business, General business tax credit. Free tax fiing D Death benefits Accelerated, Accelerated Death Benefits, Accelerated death benefits. Free tax fiing Public safety officers, Death benefits. Free tax fiing Decedent Final return, Final Income Tax Return for Decedent—Form 1040 Income in respect of, Income in Respect of a Decedent Deductions Estate tax, Estate Tax Deduction In respect of decedent, Deductions in Respect of a Decedent Medical expenses, Medical Expenses Standard, Standard Deduction Distributable net income, Distributable net income. Free tax fiing Distributions Deduction, Income Distribution Deduction Limit on deduction, Tax-exempt income not deductible. Free tax fiing Not treated as bequests, Distributions not treated as bequests. Free tax fiing Property, in kind, Property distributed in kind. Free tax fiing E Education savings account, Coverdell, Coverdell Education Savings Account (ESA), Coverdell education savings account (ESA). Free tax fiing Estate Income tax return, Income Tax Return of an Estate— Form 1041 Insolvent, Insolvent estate. Free tax fiing Period of administration, Period of Administration Tax deduction, Estate Tax Deduction Termination, Termination of Estate Transfer of unused deductions, Transfer of Unused Deductions to Beneficiaries Estate tax deduction, Estate Tax Deduction Estimated tax, Estimated tax. Free tax fiing , Transfer of Credit for Estimated Tax Payments Example Comprehensive, Comprehensive Example Decedent's final return, Final Return for Decedent—Form 1040 Estate's tax return, Income Tax Return of an Estate—Form 1041 Exemption Estate's tax return, Exemption Deduction Final return for decedent, Exemptions Expenses Accrued, Accrued expenses. Free tax fiing Administration, Administration Expenses Deductions in respect of decedent, Deductions in Respect of a Decedent Funeral, Funeral and Medical Expenses Medical, Medical Expenses, Medical and dental expenses of a decedent. Free tax fiing Extension to file Form 1041, Extension of time to file. Free tax fiing F Fiduciary relationship, Notice of fiduciary relationship. Free tax fiing Filing requirements Decedent's final return, Filing Requirements Estate's tax return, Filing Requirements Final return for decedent Credits, Credits Exemption and deductions, Exemptions and Deductions Filing requirements, Filing Requirements Income to include, Income To Include Joint return, Joint Return Name, address, and signature, Name, Address, and Signature Other taxes, Other Taxes Payments, Payments of Tax When and where to file, When and Where To File Who must file, Final Income Tax Return for Decedent—Form 1040 Form 1040NR, Nonresident Alien, Filing Requirements 1041, Income Tax Return of an Estate— Form 1041 1042, Nonresident alien beneficiary. Free tax fiing 1310, Form 1310, Statement of Person Claiming Refund Due a Deceased Taxpayer. Free tax fiing 4810, Form 4810. Free tax fiing 56, Notice of fiduciary relationship. Free tax fiing 6251, Form 6251. Free tax fiing 706, Estate and Gift Taxes SS–4, Identification number. Free tax fiing Free tax services, Free help with your tax return. Free tax fiing Funeral expenses, Funeral expenses. Free tax fiing G Gift, property, Gifts, Insurance, and Inheritances H Help (see Tax help) I Identification number, application, Identification number. Free tax fiing Income Community, Community Income Distributable net income, Distributable net income. Free tax fiing Distributed currently, Income That Must Be Distributed Currently Interest and dividend, Interest and Dividend Income (Forms 1099) Partnership, final return, Partnership Income S corporation, S Corporation Income Self-employment, Self-Employment Income Income in respect of decedent, Income in Respect of a Decedent, Inherited IRAs. Free tax fiing Income tax return of an estate Credits, tax, and payments, Credits, Tax, and Payments Exemption and deductions, Exemption and Deductions Filing requirements, Filing Requirements Income to include, Income To Include Name, address, and signature, Name, Address, and Signature When and where to file, When and Where To File Inherited IRAs, Inherited IRAs. Free tax fiing Inherited property, Gifts, Insurance, and Inheritances Installment obligations, Installment obligations. Free tax fiing , Installment obligations. Free tax fiing Insurance, Insurance J Joint return Revoked by personal representative, Personal representative may revoke joint return election. Free tax fiing Who can file, Joint Return L Losses Deduction on final return, Deduction for Losses Estate's tax return, Losses M Military or terrorist actions Claim for credit or refund, Claim for Credit or Refund Defined, Military or terrorist action defined. Free tax fiing Tax forgiveness, Tax Forgiveness for Armed Forces Members, Victims of Terrorism, and Astronauts N Notice of fiduciary relationship Form 56, Notice of fiduciary relationship. Free tax fiing P Partnership income, Partnership Income, Partnership income. Free tax fiing Penalty Information returns, Penalty. Free tax fiing Substantial valuation misstatement, Valuation misstatements. Free tax fiing Personal representative Defined, Personal Representative Duties, Duties Fees received, Fees Received by Personal Representatives Penalty, Penalty. Free tax fiing , Penalty. Free tax fiing Prompt assessment, request, Request for prompt assessment (charge) of tax. Free tax fiing Public safety officers, death benefits, Death benefits. Free tax fiing Publications (see Tax help) R Refund File for decedent, Refund Military or terrorist action deaths, Claim for Credit or Refund Release from liability, Request for discharge from personal liability for tax. Free tax fiing Return Decedent's final, Final Income Tax Return for Decedent—Form 1040 Estate's income tax, Income Tax Return of an Estate— Form 1041 Information, Information Returns Roth IRA, Roth IRAs. Free tax fiing S Separate shares rule, Separate shares rule. Free tax fiing Suggestions, Comments and suggestions. Free tax fiing Survivors Income, Other Items of Income Tax benefits, Tax Benefits for Survivors T Tax Alternative minimum Estate, Alternative minimum tax (AMT). Free tax fiing Individuals, Alternative minimum tax (AMT). Free tax fiing Benefits, survivors, Tax Benefits for Survivors Estimated, estate, Estimated tax. Free tax fiing , Transfer of Credit for Estimated Tax Payments Payments, final return, Payments of Tax Refund of income (claim), Form 1310, Statement of Person Claiming Refund Due a Deceased Taxpayer. Free tax fiing Self-employment, Self-employment tax. Free tax fiing Transfer of credit, Transfer of Credit for Estimated Tax Payments Tax help, How To Get Tax Help Terrorist action, tax relief, Tax Forgiveness for Armed Forces Members, Victims of Terrorism, and Astronauts Terrorist victim, Specified Terrorist Victim TTY/TDD information, How To Get Tax Help V Valuation method Inherited property, Basis of Inherited Property Special-use, Special-use valuation. Free tax fiing Victims of terrorist attacks, Specified Terrorist Victim W Widows and widowers, tax benefits, Qualifying widows and widowers. Free tax fiing Prev  Up     Home   More Online Publications

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Free tax fiing 8. Free tax fiing   Dividends and Other Distributions Table of Contents Reminder Introduction Useful Items - You may want to see: General InformationDividends not reported on Form 1099-DIV. Free tax fiing Reporting tax withheld. Free tax fiing Nominees. Free tax fiing Ordinary DividendsQualified Dividends Dividends Used to Buy More Stock Money Market Funds Capital Gain DistributionsBasis adjustment. Free tax fiing Nondividend DistributionsLiquidating Distributions Distributions of Stock and Stock Rights Other DistributionsInformation reporting requirement. Free tax fiing Alternative minimum tax treatment. Free tax fiing How To Report Dividend IncomeInvestment interest deducted. Free tax fiing Reminder Foreign-source income. Free tax fiing  If you are a U. Free tax fiing S. Free tax fiing 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. Free tax fiing S. Free tax fiing law. Free tax fiing 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. Free tax fiing 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. Free tax fiing This chapter also explains how to report dividend income on your tax return. Free tax fiing Dividends are distributions of money, stock, or other property paid to you by a corporation or by a mutual fund. Free tax fiing You also may receive dividends through a partnership, an estate, a trust, or an association that is taxed as a corporation. Free tax fiing However, some amounts you receive that are called dividends are actually interest income. Free tax fiing (See Dividends that are actually interest under Taxable Interest in chapter 7. Free tax fiing ) Most distributions are paid in cash (or check). Free tax fiing However, distributions can consist of more stock, stock rights, other property, or services. Free tax fiing 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. Free tax fiing Tax on unearned income of certain children. Free tax fiing   Part of a child's 2013 unearned income may be taxed at the parent's tax rate. Free tax fiing If it is, Form 8615, Tax for Certain Children Who Have Unearned Income, must be completed and attached to the child's tax return. Free tax fiing If not, Form 8615 is not required and the child's income is taxed at his or her own tax rate. Free tax fiing    Some parents can choose to include the child's interest and dividends on the parent's return if certain requirements are met. Free tax fiing Use Form 8814, Parents' Election To Report Child's Interest and Dividends, for this purpose. Free tax fiing   For more information about the tax on unearned income of children and the parents' election, see chapter 31. Free tax fiing Beneficiary of an estate or trust. Free tax fiing    Dividends and other distributions you receive as a beneficiary of an estate or trust are generally taxable income. Free tax fiing You should receive a Schedule K-1 (Form 1041), Beneficiary's Share of Income, Deductions, Credits, etc. Free tax fiing , from the fiduciary. Free tax fiing Your copy of Schedule K-1 (Form 1041) and its instructions will tell you where to report the income on your Form 1040. Free tax fiing Social security number (SSN) or individual taxpayer identification number (ITIN). Free tax fiing    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. Free tax fiing This includes payers of dividends. Free tax fiing If you do not give your SSN or ITIN to the payer of dividends, you may have to pay a penalty. Free tax fiing For more information on SSNs and ITINs, see Social Security Number (SSN) in chapter 1. Free tax fiing Backup withholding. Free tax fiing   Your dividend income is generally not subject to regular withholding. Free tax fiing However, it may be subject to backup withholding to ensure that income tax is collected on the income. Free tax fiing Under backup withholding, the payer of dividends must withhold, as income tax, on the amount you are paid, applying the appropriate withholding rate. Free tax fiing   Backup withholding may also be required if the IRS has determined that you underreported your interest or dividend income. Free tax fiing For more information, see Backup Withholding in chapter 4. Free tax fiing Stock certificate in two or more names. Free tax fiing   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. Free tax fiing Form 1099-DIV. Free tax fiing   Most corporations and mutual funds use Form 1099-DIV, Dividends and Distributions, to show you the distributions you received from them during the year. Free tax fiing Keep this form with your records. Free tax fiing You do not have to attach it to your tax return. Free tax fiing Dividends not reported on Form 1099-DIV. Free tax fiing   Even if you do not receive Form 1099-DIV, you must still report all your taxable dividend income. Free tax fiing For example, you may receive distributive shares of dividends from partnerships or S corporations. Free tax fiing These dividends are reported to you on Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. Free tax fiing , and Schedule K-1 (Form 1120S), Shareholder's Share of Income, Deductions, Credits, etc. Free tax fiing Reporting tax withheld. Free tax fiing   If tax is withheld from your dividend income, the payer must give you a Form 1099-DIV that indicates the amount withheld. Free tax fiing Nominees. Free tax fiing   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. Free tax fiing Form 1099-MISC. Free tax fiing   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. Free tax fiing See Reporting Substitute Payments under Short Sales in chapter 4 of Publication 550 for more information about reporting these payments. Free tax fiing Incorrect amount shown on a Form 1099. Free tax fiing   If you receive a Form 1099 that shows an incorrect amount (or other incorrect information), you should ask the issuer for a corrected form. Free tax fiing The new Form 1099 you receive will be marked “Corrected. Free tax fiing ” Dividends on stock sold. Free tax fiing   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. Free tax fiing Dividends received in January. Free tax fiing   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. Free tax fiing You report the dividend in the year it was declared. Free tax fiing Ordinary Dividends Ordinary (taxable) dividends are the most common type of distribution from a corporation or a mutual fund. Free tax fiing They are paid out of earnings and profits and are ordinary income to you. Free tax fiing This means they are not capital gains. Free tax fiing 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. Free tax fiing Ordinary dividends will be shown in box 1a of the Form 1099-DIV you receive. Free tax fiing 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. Free tax fiing They should be shown in box 1b of the Form 1099-DIV you receive. Free tax fiing The maximum rate of tax on qualified dividends is: 0% on any amount that otherwise would be taxed at a 10% or 15% rate. Free tax fiing 15% on any amount that otherwise would be taxed at rates greater than 15% but less than 39. Free tax fiing 6%. Free tax fiing 20% on any amount that otherwise would be taxed at a 39. Free tax fiing 6% rate. Free tax fiing To qualify for the maximum rate, all of the following requirements must be met. Free tax fiing The dividends must have been paid by a U. Free tax fiing S. Free tax fiing corporation or a qualified foreign corporation. Free tax fiing (See Qualified foreign corporation , later. Free tax fiing ) The dividends are not of the type listed later under Dividends that are not qualified dividends . Free tax fiing You meet the holding period (discussed next). Free tax fiing Holding period. Free tax fiing   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. Free tax fiing 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. Free tax fiing Instead, the seller will get the dividend. Free tax fiing   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. Free tax fiing See the examples later. Free tax fiing Exception for preferred stock. Free tax fiing   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. Free tax fiing If the preferred dividends are due to periods totaling less than 367 days, the holding period in the previous paragraph applies. Free tax fiing Example 1. Free tax fiing You bought 5,000 shares of XYZ Corp. Free tax fiing common stock on July 9, 2013. Free tax fiing XYZ Corp. Free tax fiing paid a cash dividend of 10 cents per share. Free tax fiing The ex-dividend date was July 16, 2013. Free tax fiing Your Form 1099-DIV from XYZ Corp. Free tax fiing shows $500 in box 1a (ordinary dividends) and in box 1b (qualified dividends). Free tax fiing However, you sold the 5,000 shares on August 12, 2013. Free tax fiing You held your shares of XYZ Corp. Free tax fiing for only 34 days of the 121-day period (from July 10, 2013, through August 12, 2013). Free tax fiing The 121-day period began on May 17, 2013 (60 days before the ex-dividend date), and ended on September 14, 2013. Free tax fiing You have no qualified dividends from XYZ Corp. Free tax fiing because you held the XYZ stock for less than 61 days. Free tax fiing Example 2. Free tax fiing 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. Free tax fiing You held the stock for 63 days (from July 16, 2013, through September 16, 2013). Free tax fiing 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). Free tax fiing Example 3. Free tax fiing You bought 10,000 shares of ABC Mutual Fund common stock on July 9, 2013. Free tax fiing ABC Mutual Fund paid a cash dividend of 10 cents a share. Free tax fiing The ex-dividend date was July 16, 2013. Free tax fiing The ABC Mutual Fund advises you that the portion of the dividend eligible to be treated as qualified dividends equals 2 cents per share. Free tax fiing Your Form 1099-DIV from ABC Mutual Fund shows total ordinary dividends of $1,000 and qualified dividends of $200. Free tax fiing However, you sold the 10,000 shares on August 12, 2013. Free tax fiing You have no qualified dividends from ABC Mutual Fund because you held the ABC Mutual Fund stock for less than 61 days. Free tax fiing Holding period reduced where risk of loss is diminished. Free tax fiing   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. Free tax fiing 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. Free tax fiing You were grantor (writer) of an option to buy substantially identical stock or securities. Free tax fiing Your risk of loss is diminished by holding one or more other positions in substantially similar or related property. Free tax fiing   For information about how to apply condition (3), see Regulations section 1. Free tax fiing 246-5. Free tax fiing Qualified foreign corporation. Free tax fiing   A foreign corporation is a qualified foreign corporation if it meets any of the following conditions. Free tax fiing The corporation is incorporated in a U. Free tax fiing S. Free tax fiing possession. Free tax fiing 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. Free tax fiing For a list of those treaties, see Table 8-1. Free tax fiing 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. Free tax fiing See Readily tradable stock , later. Free tax fiing Exception. Free tax fiing   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. Free tax fiing Readily tradable stock. Free tax fiing   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. Free tax fiing For a list of the exchanges that meet these requirements, see www. Free tax fiing sec. Free tax fiing gov/divisions/marketreg/mrexchanges. Free tax fiing shtml. Free tax fiing Dividends that are not qualified dividends. Free tax fiing   The following dividends are not qualified dividends. Free tax fiing They are not qualified dividends even if they are shown in box 1b of Form 1099-DIV. Free tax fiing Capital gain distributions. Free tax fiing Dividends paid on deposits with mutual savings banks, cooperative banks, credit unions, U. Free tax fiing S. Free tax fiing building and loan associations, U. Free tax fiing S. Free tax fiing savings and loan associations, federal savings and loan associations, and similar financial institutions. Free tax fiing (Report these amounts as interest income. Free tax fiing ) 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. Free tax fiing 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. Free tax fiing 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. Free tax fiing Payments in lieu of dividends, but only if you know or have reason to know the payments are not qualified dividends. Free tax fiing 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. Free tax fiing Table 8-1. Free tax fiing Income Tax Treaties Income tax treaties the United States has with the following countries satisfy requirement (2) under Qualified foreign corporation. Free tax fiing 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. Free tax fiing 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. Free tax fiing Most mutual funds also permit shareholders to automatically reinvest distributions in more shares in the fund, instead of receiving cash. Free tax fiing 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. Free tax fiing 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. Free tax fiing 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. Free tax fiing But you may be able to deduct the service charge. Free tax fiing See chapter 28 for more information about deducting expenses of producing income. Free tax fiing In some dividend reinvestment plans, you can invest more cash to buy shares of stock at a price less than fair market value. Free tax fiing 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. Free tax fiing When figuring this amount, use the fair market value of the stock on the dividend payment date. Free tax fiing Money Market Funds Report amounts you receive from money market funds as dividend income. Free tax fiing Money market funds are a type of mutual fund and should not be confused with bank money market accounts that pay interest. Free tax fiing 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). Free tax fiing They will be shown in box 2a of the Form 1099-DIV you receive from the mutual fund or REIT. Free tax fiing Report capital gain distributions as long-term capital gains, regardless of how long you owned your shares in the mutual fund or REIT. Free tax fiing Undistributed capital gains of mutual funds and REITs. Free tax fiing    Some mutual funds and REITs keep their long-term capital gains and pay tax on them. Free tax fiing You must treat your share of these gains as distributions, even though you did not actually receive them. Free tax fiing However, they are not included on Form 1099-DIV. Free tax fiing Instead, they are reported to you in box 1a of Form 2439. Free tax fiing   Report undistributed capital gains (box 1a of Form 2439) as long-term capital gains on Schedule D (Form 1040), column (h), line 11. Free tax fiing   The tax paid on these gains by the mutual fund or REIT is shown in box 2 of Form 2439. Free tax fiing You take credit for this tax by including it on Form 1040, line 71, and checking box a on that line. Free tax fiing Attach Copy B of Form 2439 to your return, and keep Copy C for your records. Free tax fiing Basis adjustment. Free tax fiing   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. Free tax fiing Additional information. Free tax fiing   For more information on the treatment of distributions from mutual funds, see Publication 550. Free tax fiing 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. Free tax fiing You should receive a Form 1099-DIV or other statement showing the nondividend distribution. Free tax fiing On Form 1099-DIV, a nondividend distribution will be shown in box 3. Free tax fiing If you do not receive such a statement, you report the distribution as an ordinary dividend. Free tax fiing Basis adjustment. Free tax fiing   A nondividend distribution reduces the basis of your stock. Free tax fiing It is not taxed until your basis in the stock is fully recovered. Free tax fiing This nontaxable portion is also called a return of capital; it is a return of your investment in the stock of the company. Free tax fiing 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. Free tax fiing   When the basis of your stock has been reduced to zero, report any additional nondividend distribution you receive as a capital gain. Free tax fiing Whether you report it as a long-term or short-term capital gain depends on how long you have held the stock. Free tax fiing See Holding Period in chapter 14. Free tax fiing Example. Free tax fiing You bought stock in 2000 for $100. Free tax fiing In 2003, you received a nondividend distribution of $80. Free tax fiing You did not include this amount in your income, but you reduced the basis of your stock to $20. Free tax fiing You received a nondividend distribution of $30 in 2013. Free tax fiing The first $20 of this amount reduced your basis to zero. Free tax fiing You report the other $10 as a long-term capital gain for 2013. Free tax fiing You must report as a long-term capital gain any nondividend distribution you receive on this stock in later years. Free tax fiing Liquidating Distributions Liquidating distributions, sometimes called liquidating dividends, are distributions you receive during a partial or complete liquidation of a corporation. Free tax fiing These distributions are, at least in part, one form of a return of capital. Free tax fiing They may be paid in one or more installments. Free tax fiing You will receive Form 1099-DIV from the corporation showing you the amount of the liquidating distribution in box 8 or 9. Free tax fiing For more information on liquidating distributions, see chapter 1 of Publication 550. Free tax fiing Distributions of Stock and Stock Rights Distributions by a corporation of its own stock are commonly known as stock dividends. Free tax fiing Stock rights (also known as “stock options”) are distributions by a corporation of rights to acquire the corporation's stock. Free tax fiing Generally, stock dividends and stock rights are not taxable to you, and you do not report them on your return. Free tax fiing Taxable stock dividends and stock rights. Free tax fiing   Distributions of stock dividends and stock rights are taxable to you if any of the following apply. Free tax fiing You or any other shareholder have the choice to receive cash or other property instead of stock or stock rights. Free tax fiing 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. Free tax fiing The distribution is in convertible preferred stock and has the same result as in (2). Free tax fiing The distribution gives preferred stock to some common stock shareholders and common stock to other common stock shareholders. Free tax fiing The distribution is on preferred stock. Free tax fiing (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. Free tax fiing )   The term “stock” includes rights to acquire stock, and the term “shareholder” includes a holder of rights or of convertible securities. Free tax fiing If you receive taxable stock dividends or stock rights, include their fair market value at the time of distribution in your income. Free tax fiing Preferred stock redeemable at a premium. Free tax fiing   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. Free tax fiing For more information, see chapter 1 of Publication 550. Free tax fiing Basis. Free tax fiing   Your basis in stock or stock rights received in a taxable distribution is their fair market value when distributed. Free tax fiing 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. Free tax fiing Fractional shares. Free tax fiing    You may not own enough stock in a corporation to receive a full share of stock if the corporation declares a stock dividend. Free tax fiing 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. Free tax fiing Any cash you receive for fractional shares under such a plan is treated as an amount realized on the sale of the fractional shares. Free tax fiing Report this transaction on Form 8949, Sales and Other Dispositions of Capital Assets. Free tax fiing 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. Free tax fiing    Report these transactions on Form 8949 with the correct box checked. Free tax fiing   For more information on Form 8949 and Schedule D (Form 1040), see chapter 4 of Publication 550. Free tax fiing Also see the Instructions for Form 8949 and the Instructions for Schedule D (Form 1040). Free tax fiing Example. Free tax fiing You own one share of common stock that you bought on January 3, 2004, for $100. Free tax fiing The corporation declared a common stock dividend of 5% on June 29, 2013. Free tax fiing The fair market value of the stock at the time the stock dividend was declared was $200. Free tax fiing You were paid $10 for the fractional-share stock dividend under a plan described in the discussion above. Free tax fiing You figure your gain or loss as follows: Fair market value of old stock $200. Free tax fiing 00 Fair market value of stock dividend (cash received) +10. Free tax fiing 00 Fair market value of old stock and stock dividend $210. Free tax fiing 00 Basis (cost) of old stock after the stock dividend (($200 ÷ $210) × $100) $95. Free tax fiing 24 Basis (cost) of stock dividend (($10 ÷ $210) × $100) + 4. Free tax fiing 76 Total $100. Free tax fiing 00 Cash received $10. Free tax fiing 00 Basis (cost) of stock dividend − 4. Free tax fiing 76 Gain $5. Free tax fiing 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. Free tax fiing Scrip dividends. Free tax fiing   A corporation that declares a stock dividend may issue you a scrip certificate that entitles you to a fractional share. Free tax fiing The certificate is generally nontaxable when you receive it. Free tax fiing 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. Free tax fiing   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. Free tax fiing You must include its fair market value in income on the date you receive it. Free tax fiing Other Distributions You may receive any of the following distributions during the year. Free tax fiing Exempt-interest dividends. Free tax fiing   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. Free tax fiing Exempt-interest dividends should be shown in box 10 of Form 1099-DIV. Free tax fiing Information reporting requirement. Free tax fiing   Although exempt-interest dividends are not taxable, you must show them on your tax return if you have to file a return. Free tax fiing This is an information reporting requirement and does not change the exempt-interest dividends to taxable income. Free tax fiing Alternative minimum tax treatment. Free tax fiing   Exempt-interest dividends paid from specified private activity bonds may be subject to the alternative minimum tax. Free tax fiing See Alternative Minimum Tax (AMT) in chapter 30 for more information. Free tax fiing Dividends on insurance policies. Free tax fiing    Insurance policy dividends the insurer keeps and uses to pay your premiums are not taxable. Free tax fiing However, you must report as taxable interest income the interest that is paid or credited on dividends left with the insurance company. Free tax fiing    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. Free tax fiing Do not include them in your gross income until they are more than the total of all net premiums you paid for the contract. Free tax fiing Report any taxable distributions on insurance policies on Form 1040, line 21. Free tax fiing Dividends on veterans' insurance. Free tax fiing   Dividends you receive on veterans' insurance policies are not taxable. Free tax fiing In addition, interest on dividends left with the Department of Veterans Affairs is not taxable. Free tax fiing Patronage dividends. Free tax fiing   Generally, patronage dividends you receive in money from a cooperative organization are included in your income. Free tax fiing   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. Free tax fiing But you must reduce the basis (cost) of the items bought. Free tax fiing If the dividend is more than the adjusted basis of the assets, you must report the excess as income. Free tax fiing   These rules are the same whether the cooperative paying the dividend is a taxable or tax-exempt cooperative. Free tax fiing Alaska Permanent Fund dividends. Free tax fiing    Do not report these amounts as dividends. Free tax fiing Instead, report these amounts on Form 1040, line 21; Form 1040A, line 13; or Form 1040EZ, line 3. Free tax fiing How To Report Dividend Income Generally, you can use either Form 1040 or Form 1040A to report your dividend income. Free tax fiing Report the total of your ordinary dividends on line 9a of Form 1040 or Form 1040A. Free tax fiing Report qualified dividends on line 9b of Form 1040 or Form 1040A. Free tax fiing If you receive capital gain distributions, you may be able to use Form 1040A or you may have to use Form 1040. Free tax fiing See Exceptions to filing Form 8949 and Schedule D (Form 1040) in chapter 16. Free tax fiing If you receive nondividend distributions required to be reported as capital gains, you must use Form 1040. Free tax fiing You cannot use Form 1040EZ if you receive any dividend income. Free tax fiing Form 1099-DIV. Free tax fiing   If you owned stock on which you received $10 or more in dividends and other distributions, you should receive a Form 1099-DIV. Free tax fiing Even if you do not receive Form 1099-DIV, you must report all your dividend income. Free tax fiing   See Form 1099-DIV for more information on how to report dividend income. Free tax fiing Form 1040A or 1040. Free tax fiing    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. Free tax fiing If your ordinary dividends are more than $1,500, you must also complete Schedule B (Form 1040A or 1040), Part III. Free tax fiing   List on Schedule B (Form 1040A or 1040), Part II, line 5, each payer's name and the ordinary dividends you received. Free tax fiing 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. Free tax fiing 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. Free tax fiing   Enter on line 6 the total of the amounts listed on line 5. Free tax fiing Also enter this total on line 9a of Form 1040A or 1040. Free tax fiing Qualified dividends. Free tax fiing   Report qualified dividends (Form 1099-DIV, box 1b) on line 9b of Form 1040 or Form 1040A. Free tax fiing The amount in box 1b is already included in box 1a. Free tax fiing Do not add the amount in box 1b to, or substract it from, the amount in box 1a. Free tax fiing   Do not include any of the following on line 9b. Free tax fiing Qualified dividends you received as a nominee. Free tax fiing See Nominees under How to Report Dividend Income in chapter 1 of Publication 550. Free tax fiing Dividends on stock for which you did not meet the holding period. Free tax fiing See Holding period , earlier under Qualified Dividends. Free tax fiing 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. Free tax fiing Payments in lieu of dividends, but only if you know or have reason to know the payments are not qualified dividends. Free tax fiing 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. Free tax fiing   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. Free tax fiing Enter qualified dividends on line 2 of the worksheet. Free tax fiing Investment interest deducted. Free tax fiing   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. Free tax fiing Reduce it by the qualified dividends you choose to include in investment income when figuring the limit on your investment interest deduction. Free tax fiing This is done on the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet. Free tax fiing For more information about the limit on investment interest, see Investment expenses in chapter 23. Free tax fiing Expenses related to dividend income. Free tax fiing   You may be able to deduct expenses related to dividend income if you itemize your deductions on Schedule A (Form 1040). Free tax fiing See chapter 28 for general information about deducting expenses of producing income. Free tax fiing More information. Free tax fiing    For more information about how to report dividend income, see chapter 1 of Publication 550 or the instructions for the form you must file. Free tax fiing Prev  Up  Next   Home   More Online Publications