Liquidating distribution on 1099

Do you know how it affects your taxes or your investments? Regardless, you should still understand what is reported on the 1099-DIV, the tax consequences of each box, and how it might affect your investments.Unfortunately, not all dividends and distributions are taxed the same. In turn, it might even help you build a more tax efficient investment strategy and lower your taxes in the long run.A corporation may render noncash liquidating distributions, cash liquidating dividends or both.The Internal Revenue Service requires a recipient of a cash liquidating distribution to record the amount he receives on Line 8 of Form 1099-DIV.Simply put, instead of receiving .24 in dividends, the company automatically purchases for you however many shares (or portions of a share) that .24 will buy.This nets you a little more stock each time, so that, ultimately, you end up with more shares than you started with.In other words, maintain a record of how much you earned in case you don’t receive a 1099-DIV.A DRIP, or dividend reinvestment plan, is a method that allows you to use your dividends to purchase more of the same stock instead of receiving the dividends in cash.

Depending upon how you receive dividends, you may need to plan ahead for tax day.Cash liquidation distribution proceedings are intimated through the Form 1099-DIV.When a corporation liquidates its assets in part or in entirety, the corporation may issue liquidating distributions, also known as liquidating dividends, to its stockholders.If the total amount received by a stockholder exceeds the taxpayer's basis in the corporation's stock, he records a capital gain on his federal taxes.Investors with taxable accounts have a bigger pile of tax forms to deal with every year.

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