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1040a form Publication 54 - Introductory Material Table of Contents Future Developments What's New Reminders IntroductionOrdering forms and publications. 1040a form Tax questions. 1040a form Future Developments For the latest information about developments related to Publication 54, such as legislation enacted after it was published, go to www. 1040a form irs. 1040a form gov/pub54. 1040a form What's New Exclusion amount. 1040a form The maximum foreign earned income exclusion is adjusted annually for inflation. 1040a form For 2013, the maximum exclusion has increased to $97,600. 1040a form See Limit on Excludable Amount under Foreign Earned Income Exclusion in chapter 4. 1040a form Housing expenses — base amount. 1040a form The computation of the base housing amount (line 32 of Form 2555) is tied to the maximum foreign earned income exclusion. 1040a form The amount is 16 percent of the exclusion amount (computed on a daily basis), multiplied by the number of days in your qualifying period that fall within your 2013 tax year. 1040a form For 2013, this amount is $42. 1040a form 78 per day ($15,616 per year). 1040a form See Housing Amount under Foreign Housing Exclusion and Deduction in chapter 4. 1040a form Housing expenses — maximum amount. 1040a form The amount of qualified housing expenses eligible for the housing exclusion and housing deduction has changed for some locations. 1040a form See Limit on housing expenses under Foreign Housing Exclusion and Deduction in chapter 4. 1040a form Filing requirements. 1040a form Generally, the amount of income you can receive before you must file an income tax return has increased. 1040a form These amounts are shown in chapter 1 under Filing Requirements . 1040a form Self-employment tax rate. 1040a form For 2013, the self-employment tax rate of 13. 1040a form 3% has increased to 15. 1040a form 3%. 1040a form The maximum amount of net earnings from self-employment that is subject to the social security part of the self-employment tax has increased to $113,700. 1040a form All net earnings are subject to the Medicare part of the tax. 1040a form For more information, see chapter 3. 1040a form IRA limitations for 2013. 1040a form . 1040a form The 2013 contribution limit to an IRA has increased to $5,500 ($6,500 if age 50 or older). 1040a form You may be able to take an IRA deduction if you were covered by a retirement plan and your 2013 modified adjusted gross income (AGI) is less than $69,000 ($115,000 if married filing jointly or a qualifying widow(er)). 1040a form If your spouse was covered by a retirement plan, but you were not, you may be able to take an IRA deduction if your 2013 modified AGI is less than $188,000. 1040a form See the Instructions for Form 1040 or the Instructions for Form 1040A for details and exceptions. 1040a form Reminders Figuring tax on income not excluded. 1040a form If you claim the foreign earned income exclusion, the housing exclusion, or both, you must figure the tax on your nonexcluded income using the tax rates that would have applied had you not claimed the exclusions. 1040a form See the Instructions for Form 1040 and complete the Foreign Earned Income Tax Worksheet to figure the amount of tax to enter on Form 1040, line 44. 1040a form If you must attach Form 6251 to your return, use the Foreign Earned Income Tax Worksheet provided in the Instructions for Form 6251. 1040a form Form 8938. 1040a form If you had foreign financial assets in 2013, you may have to file Form 8938 with your return. 1040a form See Form 8938 in chapter 1. 1040a form Change of address. 1040a form If you change your home mailing address, notify the Internal Revenue Service using Form 8822, Change of Address. 1040a form If you are changing your business address, use Form 8822-B, Change of Address or Responsible Party—Business. 1040a form Photographs of missing children. 1040a form The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. 1040a form Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. 1040a form You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. 1040a form Introduction This publication discusses special tax rules for U. 1040a form S. 1040a form citizens and resident aliens who work abroad or who have income earned in foreign countries. 1040a form If you are a U. 1040a form S. 1040a form citizen or resident alien, your worldwide income generally is subject to U. 1040a form S. 1040a form income tax, regardless of where you are living. 1040a form Also, you are subject to the same income tax filing requirements that apply to U. 1040a form S. 1040a form citizens or resident aliens living in the United States. 1040a form Expatriation tax provisions apply to U. 1040a form S. 1040a form citizens who have renounced their citizenship and long-term residents who have ended their residency. 1040a form These provisions are discussed in chapter 4 of Publication 519, U. 1040a form S. 1040a form Tax Guide for Aliens. 1040a form Resident alien. 1040a form A resident alien is an individual who is not a citizen or national of the United States and who meets either the green card test or the substantial presence test for the calendar year. 1040a form Green card test. 1040a form You are a U. 1040a form S. 1040a form resident if you were a lawful permanent resident of the United States at any time during the calendar year. 1040a form This is known as the green card test because resident aliens hold immigrant visas (also known as green cards). 1040a form Substantial presence test. 1040a form You are considered a U. 1040a form S. 1040a form resident if you meet the substantial presence test for the calendar year. 1040a form To meet this test, you must be physically present in the United States on at least: 31 days during the current calendar year, and A total of 183 days during the current year and the 2 preceding years, counting all the days of physical presence in the current year, but only 1/3 the number of days of presence in the first preceding year, and only 1/6 the number of days in the second preceding year. 1040a form Example. 1040a form You were physically present in the United States on 120 days in each of the years 2011, 2012, and 2013. 1040a form To determine if you meet the substantial presence test for 2013, count the full 120 days of presence in 2013, 40 days in 2012 (1/3 of 120), and 20 days in 2011 (1/6 of 120). 1040a form Because the total for the 3-year period is 180 days, you are not considered a resident under the substantial presence test for 2013. 1040a form For more information on resident and nonresident status, the tests for residence, and the exceptions to them, see Publication 519. 1040a form Filing information. 1040a form Chapter 1 contains general filing information, such as: Whether you must file a U. 1040a form S. 1040a form tax return, When and where to file your return, How to report your income if it is paid in foreign currency, How to treat a nonresident alien spouse as a U. 1040a form S. 1040a form resident, and Whether you must pay estimated tax. 1040a form Withholding tax. 1040a form Chapter 2 discusses the withholding of income, social security, and Medicare taxes from the pay of U. 1040a form S. 1040a form citizens and resident aliens. 1040a form Self-employment tax. 1040a form Chapter 3 discusses who must pay self-employment tax. 1040a form Foreign earned income exclusion and housing exclusion and deduction. 1040a form Chapter 4 discusses income tax benefits that apply if you meet certain requirements while living abroad. 1040a form You may qualify to treat up to $97,600 of your income as not taxable by the United States. 1040a form You also may be able to either deduct part of your housing expenses from your income or treat a limited amount of income used for housing expenses as not taxable by the United States. 1040a form These benefits are called the foreign earned income exclusion and the foreign housing deduction and exclusion. 1040a form To qualify for either of the exclusions or the deduction, you must have a tax home in a foreign country and earn income from personal services performed in a foreign country. 1040a form These rules are explained in chapter 4. 1040a form If you are going to exclude or deduct your income as discussed above, you must file Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion. 1040a form Exemptions, deductions, and credits. 1040a form Chapter 5 discusses exemptions, deductions, and credits you may be able to claim on your return. 1040a form These are generally the same as if you were living in the United States. 1040a form However, if you choose to exclude foreign earned income or housing amounts, you cannot deduct or exclude any item or take a credit for any item that is related to the amounts you exclude. 1040a form Among the topics discussed in chapter 5 are: Exemptions, Contributions to foreign organizations, Foreign moving expenses, Contributions to individual retirement arrangements (IRAs), and Foreign taxes. 1040a form Tax treaty benefits. 1040a form Chapter 6 discusses some benefits that are common to most tax treaties and explains how to get help if you think you are not receiving a treaty benefit to which you are entitled. 1040a form It also explains how to get copies of tax treaties. 1040a form How to get tax help. 1040a form Chapter 7 is an explanation of how to get information and assistance from the IRS. 1040a form Questions and answers. 1040a form Frequently asked questions and answers to those questions are presented in the back of the publication. 1040a form Comments and suggestions. 1040a form We welcome your comments about this publication and your suggestions for future editions. 1040a form You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. 1040a form NW, IR-6526 Washington, DC 20224 We respond to many letters by telephone. 1040a form Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. 1040a form You can send us comments from www. 1040a form irs. 1040a form gov/formspubs/. 1040a form Click on “More Information” and then on “Comment on Tax Forms and Publications. 1040a form ” Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. 1040a form Ordering forms and publications. 1040a form Visit www. 1040a form irs. 1040a form gov/formspubs/ to download forms and publications, call 1-800-829-3676, or write to the address below and receive a response within 10 days after your request is received. 1040a form Internal Revenue Service 1201 N. 1040a form Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. 1040a form If you have a tax question, check the information available on IRS. 1040a form gov or call 1-800-TAX–FORM (1-800-829-1040). 1040a form We cannot answer tax questions sent to either of the above addresses. 1040a form Prev Up Next Home More Online Publications
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The 1040a Form
1040a form 8. 1040a form Dividends and Other Distributions Table of Contents Reminder Introduction Useful Items - You may want to see: General InformationDividends not reported on Form 1099-DIV. 1040a form Reporting tax withheld. 1040a form Nominees. 1040a form Ordinary DividendsQualified Dividends Dividends Used to Buy More Stock Money Market Funds Capital Gain DistributionsBasis adjustment. 1040a form Nondividend DistributionsLiquidating Distributions Distributions of Stock and Stock Rights Other DistributionsInformation reporting requirement. 1040a form Alternative minimum tax treatment. 1040a form How To Report Dividend IncomeInvestment interest deducted. 1040a form Reminder Foreign-source income. 1040a form If you are a U. 1040a form S. 1040a form 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. 1040a form S. 1040a form law. 1040a form 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. 1040a form 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. 1040a form This chapter also explains how to report dividend income on your tax return. 1040a form Dividends are distributions of money, stock, or other property paid to you by a corporation or by a mutual fund. 1040a form You also may receive dividends through a partnership, an estate, a trust, or an association that is taxed as a corporation. 1040a form However, some amounts you receive that are called dividends are actually interest income. 1040a form (See Dividends that are actually interest under Taxable Interest in chapter 7. 1040a form ) Most distributions are paid in cash (or check). 1040a form However, distributions can consist of more stock, stock rights, other property, or services. 1040a form 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. 1040a form Tax on unearned income of certain children. 1040a form Part of a child's 2013 unearned income may be taxed at the parent's tax rate. 1040a form If it is, Form 8615, Tax for Certain Children Who Have Unearned Income, must be completed and attached to the child's tax return. 1040a form If not, Form 8615 is not required and the child's income is taxed at his or her own tax rate. 1040a form Some parents can choose to include the child's interest and dividends on the parent's return if certain requirements are met. 1040a form Use Form 8814, Parents' Election To Report Child's Interest and Dividends, for this purpose. 1040a form For more information about the tax on unearned income of children and the parents' election, see chapter 31. 1040a form Beneficiary of an estate or trust. 1040a form Dividends and other distributions you receive as a beneficiary of an estate or trust are generally taxable income. 1040a form You should receive a Schedule K-1 (Form 1041), Beneficiary's Share of Income, Deductions, Credits, etc. 1040a form , from the fiduciary. 1040a form Your copy of Schedule K-1 (Form 1041) and its instructions will tell you where to report the income on your Form 1040. 1040a form Social security number (SSN) or individual taxpayer identification number (ITIN). 1040a form 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. 1040a form This includes payers of dividends. 1040a form If you do not give your SSN or ITIN to the payer of dividends, you may have to pay a penalty. 1040a form For more information on SSNs and ITINs, see Social Security Number (SSN) in chapter 1. 1040a form Backup withholding. 1040a form Your dividend income is generally not subject to regular withholding. 1040a form However, it may be subject to backup withholding to ensure that income tax is collected on the income. 1040a form Under backup withholding, the payer of dividends must withhold, as income tax, on the amount you are paid, applying the appropriate withholding rate. 1040a form Backup withholding may also be required if the IRS has determined that you underreported your interest or dividend income. 1040a form For more information, see Backup Withholding in chapter 4. 1040a form Stock certificate in two or more names. 1040a form 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. 1040a form Form 1099-DIV. 1040a form Most corporations and mutual funds use Form 1099-DIV, Dividends and Distributions, to show you the distributions you received from them during the year. 1040a form Keep this form with your records. 1040a form You do not have to attach it to your tax return. 1040a form Dividends not reported on Form 1099-DIV. 1040a form Even if you do not receive Form 1099-DIV, you must still report all your taxable dividend income. 1040a form For example, you may receive distributive shares of dividends from partnerships or S corporations. 1040a form These dividends are reported to you on Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. 1040a form , and Schedule K-1 (Form 1120S), Shareholder's Share of Income, Deductions, Credits, etc. 1040a form Reporting tax withheld. 1040a form If tax is withheld from your dividend income, the payer must give you a Form 1099-DIV that indicates the amount withheld. 1040a form Nominees. 1040a form 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. 1040a form Form 1099-MISC. 1040a form 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. 1040a form See Reporting Substitute Payments under Short Sales in chapter 4 of Publication 550 for more information about reporting these payments. 1040a form Incorrect amount shown on a Form 1099. 1040a form If you receive a Form 1099 that shows an incorrect amount (or other incorrect information), you should ask the issuer for a corrected form. 1040a form The new Form 1099 you receive will be marked “Corrected. 1040a form ” Dividends on stock sold. 1040a form 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. 1040a form Dividends received in January. 1040a form 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. 1040a form You report the dividend in the year it was declared. 1040a form Ordinary Dividends Ordinary (taxable) dividends are the most common type of distribution from a corporation or a mutual fund. 1040a form They are paid out of earnings and profits and are ordinary income to you. 1040a form This means they are not capital gains. 1040a form 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. 1040a form Ordinary dividends will be shown in box 1a of the Form 1099-DIV you receive. 1040a form 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. 1040a form They should be shown in box 1b of the Form 1099-DIV you receive. 1040a form The maximum rate of tax on qualified dividends is: 0% on any amount that otherwise would be taxed at a 10% or 15% rate. 1040a form 15% on any amount that otherwise would be taxed at rates greater than 15% but less than 39. 1040a form 6%. 1040a form 20% on any amount that otherwise would be taxed at a 39. 1040a form 6% rate. 1040a form To qualify for the maximum rate, all of the following requirements must be met. 1040a form The dividends must have been paid by a U. 1040a form S. 1040a form corporation or a qualified foreign corporation. 1040a form (See Qualified foreign corporation , later. 1040a form ) The dividends are not of the type listed later under Dividends that are not qualified dividends . 1040a form You meet the holding period (discussed next). 1040a form Holding period. 1040a form 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. 1040a form 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. 1040a form Instead, the seller will get the dividend. 1040a form 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. 1040a form See the examples later. 1040a form Exception for preferred stock. 1040a form 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. 1040a form If the preferred dividends are due to periods totaling less than 367 days, the holding period in the previous paragraph applies. 1040a form Example 1. 1040a form You bought 5,000 shares of XYZ Corp. 1040a form common stock on July 9, 2013. 1040a form XYZ Corp. 1040a form paid a cash dividend of 10 cents per share. 1040a form The ex-dividend date was July 16, 2013. 1040a form Your Form 1099-DIV from XYZ Corp. 1040a form shows $500 in box 1a (ordinary dividends) and in box 1b (qualified dividends). 1040a form However, you sold the 5,000 shares on August 12, 2013. 1040a form You held your shares of XYZ Corp. 1040a form for only 34 days of the 121-day period (from July 10, 2013, through August 12, 2013). 1040a form The 121-day period began on May 17, 2013 (60 days before the ex-dividend date), and ended on September 14, 2013. 1040a form You have no qualified dividends from XYZ Corp. 1040a form because you held the XYZ stock for less than 61 days. 1040a form Example 2. 1040a form 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. 1040a form You held the stock for 63 days (from July 16, 2013, through September 16, 2013). 1040a form 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). 1040a form Example 3. 1040a form You bought 10,000 shares of ABC Mutual Fund common stock on July 9, 2013. 1040a form ABC Mutual Fund paid a cash dividend of 10 cents a share. 1040a form The ex-dividend date was July 16, 2013. 1040a form The ABC Mutual Fund advises you that the portion of the dividend eligible to be treated as qualified dividends equals 2 cents per share. 1040a form Your Form 1099-DIV from ABC Mutual Fund shows total ordinary dividends of $1,000 and qualified dividends of $200. 1040a form However, you sold the 10,000 shares on August 12, 2013. 1040a form You have no qualified dividends from ABC Mutual Fund because you held the ABC Mutual Fund stock for less than 61 days. 1040a form Holding period reduced where risk of loss is diminished. 1040a form 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. 1040a form 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. 1040a form You were grantor (writer) of an option to buy substantially identical stock or securities. 1040a form Your risk of loss is diminished by holding one or more other positions in substantially similar or related property. 1040a form For information about how to apply condition (3), see Regulations section 1. 1040a form 246-5. 1040a form Qualified foreign corporation. 1040a form A foreign corporation is a qualified foreign corporation if it meets any of the following conditions. 1040a form The corporation is incorporated in a U. 1040a form S. 1040a form possession. 1040a form 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. 1040a form For a list of those treaties, see Table 8-1. 1040a form 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. 1040a form See Readily tradable stock , later. 1040a form Exception. 1040a form 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. 1040a form Readily tradable stock. 1040a form 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. 1040a form For a list of the exchanges that meet these requirements, see www. 1040a form sec. 1040a form gov/divisions/marketreg/mrexchanges. 1040a form shtml. 1040a form Dividends that are not qualified dividends. 1040a form The following dividends are not qualified dividends. 1040a form They are not qualified dividends even if they are shown in box 1b of Form 1099-DIV. 1040a form Capital gain distributions. 1040a form Dividends paid on deposits with mutual savings banks, cooperative banks, credit unions, U. 1040a form S. 1040a form building and loan associations, U. 1040a form S. 1040a form savings and loan associations, federal savings and loan associations, and similar financial institutions. 1040a form (Report these amounts as interest income. 1040a form ) 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. 1040a form 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. 1040a form 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. 1040a form Payments in lieu of dividends, but only if you know or have reason to know the payments are not qualified dividends. 1040a form 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. 1040a form Table 8-1. 1040a form Income Tax Treaties Income tax treaties the United States has with the following countries satisfy requirement (2) under Qualified foreign corporation. 1040a form 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. 1040a form 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. 1040a form Most mutual funds also permit shareholders to automatically reinvest distributions in more shares in the fund, instead of receiving cash. 1040a form 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. 1040a form 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. 1040a form 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. 1040a form But you may be able to deduct the service charge. 1040a form See chapter 28 for more information about deducting expenses of producing income. 1040a form In some dividend reinvestment plans, you can invest more cash to buy shares of stock at a price less than fair market value. 1040a form 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. 1040a form When figuring this amount, use the fair market value of the stock on the dividend payment date. 1040a form Money Market Funds Report amounts you receive from money market funds as dividend income. 1040a form Money market funds are a type of mutual fund and should not be confused with bank money market accounts that pay interest. 1040a form 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). 1040a form They will be shown in box 2a of the Form 1099-DIV you receive from the mutual fund or REIT. 1040a form Report capital gain distributions as long-term capital gains, regardless of how long you owned your shares in the mutual fund or REIT. 1040a form Undistributed capital gains of mutual funds and REITs. 1040a form Some mutual funds and REITs keep their long-term capital gains and pay tax on them. 1040a form You must treat your share of these gains as distributions, even though you did not actually receive them. 1040a form However, they are not included on Form 1099-DIV. 1040a form Instead, they are reported to you in box 1a of Form 2439. 1040a form Report undistributed capital gains (box 1a of Form 2439) as long-term capital gains on Schedule D (Form 1040), column (h), line 11. 1040a form The tax paid on these gains by the mutual fund or REIT is shown in box 2 of Form 2439. 1040a form You take credit for this tax by including it on Form 1040, line 71, and checking box a on that line. 1040a form Attach Copy B of Form 2439 to your return, and keep Copy C for your records. 1040a form Basis adjustment. 1040a form 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. 1040a form Additional information. 1040a form For more information on the treatment of distributions from mutual funds, see Publication 550. 1040a form 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. 1040a form You should receive a Form 1099-DIV or other statement showing the nondividend distribution. 1040a form On Form 1099-DIV, a nondividend distribution will be shown in box 3. 1040a form If you do not receive such a statement, you report the distribution as an ordinary dividend. 1040a form Basis adjustment. 1040a form A nondividend distribution reduces the basis of your stock. 1040a form It is not taxed until your basis in the stock is fully recovered. 1040a form This nontaxable portion is also called a return of capital; it is a return of your investment in the stock of the company. 1040a form 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. 1040a form When the basis of your stock has been reduced to zero, report any additional nondividend distribution you receive as a capital gain. 1040a form Whether you report it as a long-term or short-term capital gain depends on how long you have held the stock. 1040a form See Holding Period in chapter 14. 1040a form Example. 1040a form You bought stock in 2000 for $100. 1040a form In 2003, you received a nondividend distribution of $80. 1040a form You did not include this amount in your income, but you reduced the basis of your stock to $20. 1040a form You received a nondividend distribution of $30 in 2013. 1040a form The first $20 of this amount reduced your basis to zero. 1040a form You report the other $10 as a long-term capital gain for 2013. 1040a form You must report as a long-term capital gain any nondividend distribution you receive on this stock in later years. 1040a form Liquidating Distributions Liquidating distributions, sometimes called liquidating dividends, are distributions you receive during a partial or complete liquidation of a corporation. 1040a form These distributions are, at least in part, one form of a return of capital. 1040a form They may be paid in one or more installments. 1040a form You will receive Form 1099-DIV from the corporation showing you the amount of the liquidating distribution in box 8 or 9. 1040a form For more information on liquidating distributions, see chapter 1 of Publication 550. 1040a form Distributions of Stock and Stock Rights Distributions by a corporation of its own stock are commonly known as stock dividends. 1040a form Stock rights (also known as “stock options”) are distributions by a corporation of rights to acquire the corporation's stock. 1040a form Generally, stock dividends and stock rights are not taxable to you, and you do not report them on your return. 1040a form Taxable stock dividends and stock rights. 1040a form Distributions of stock dividends and stock rights are taxable to you if any of the following apply. 1040a form You or any other shareholder have the choice to receive cash or other property instead of stock or stock rights. 1040a form 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. 1040a form The distribution is in convertible preferred stock and has the same result as in (2). 1040a form The distribution gives preferred stock to some common stock shareholders and common stock to other common stock shareholders. 1040a form The distribution is on preferred stock. 1040a form (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. 1040a form ) The term “stock” includes rights to acquire stock, and the term “shareholder” includes a holder of rights or of convertible securities. 1040a form If you receive taxable stock dividends or stock rights, include their fair market value at the time of distribution in your income. 1040a form Preferred stock redeemable at a premium. 1040a form 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. 1040a form For more information, see chapter 1 of Publication 550. 1040a form Basis. 1040a form Your basis in stock or stock rights received in a taxable distribution is their fair market value when distributed. 1040a form 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. 1040a form Fractional shares. 1040a form You may not own enough stock in a corporation to receive a full share of stock if the corporation declares a stock dividend. 1040a form 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. 1040a form Any cash you receive for fractional shares under such a plan is treated as an amount realized on the sale of the fractional shares. 1040a form Report this transaction on Form 8949, Sales and Other Dispositions of Capital Assets. 1040a form 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. 1040a form Report these transactions on Form 8949 with the correct box checked. 1040a form For more information on Form 8949 and Schedule D (Form 1040), see chapter 4 of Publication 550. 1040a form Also see the Instructions for Form 8949 and the Instructions for Schedule D (Form 1040). 1040a form Example. 1040a form You own one share of common stock that you bought on January 3, 2004, for $100. 1040a form The corporation declared a common stock dividend of 5% on June 29, 2013. 1040a form The fair market value of the stock at the time the stock dividend was declared was $200. 1040a form You were paid $10 for the fractional-share stock dividend under a plan described in the discussion above. 1040a form You figure your gain or loss as follows: Fair market value of old stock $200. 1040a form 00 Fair market value of stock dividend (cash received) +10. 1040a form 00 Fair market value of old stock and stock dividend $210. 1040a form 00 Basis (cost) of old stock after the stock dividend (($200 ÷ $210) × $100) $95. 1040a form 24 Basis (cost) of stock dividend (($10 ÷ $210) × $100) + 4. 1040a form 76 Total $100. 1040a form 00 Cash received $10. 1040a form 00 Basis (cost) of stock dividend − 4. 1040a form 76 Gain $5. 1040a form 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. 1040a form Scrip dividends. 1040a form A corporation that declares a stock dividend may issue you a scrip certificate that entitles you to a fractional share. 1040a form The certificate is generally nontaxable when you receive it. 1040a form 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. 1040a form 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. 1040a form You must include its fair market value in income on the date you receive it. 1040a form Other Distributions You may receive any of the following distributions during the year. 1040a form Exempt-interest dividends. 1040a form 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. 1040a form Exempt-interest dividends should be shown in box 10 of Form 1099-DIV. 1040a form Information reporting requirement. 1040a form Although exempt-interest dividends are not taxable, you must show them on your tax return if you have to file a return. 1040a form This is an information reporting requirement and does not change the exempt-interest dividends to taxable income. 1040a form Alternative minimum tax treatment. 1040a form Exempt-interest dividends paid from specified private activity bonds may be subject to the alternative minimum tax. 1040a form See Alternative Minimum Tax (AMT) in chapter 30 for more information. 1040a form Dividends on insurance policies. 1040a form Insurance policy dividends the insurer keeps and uses to pay your premiums are not taxable. 1040a form However, you must report as taxable interest income the interest that is paid or credited on dividends left with the insurance company. 1040a form 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. 1040a form Do not include them in your gross income until they are more than the total of all net premiums you paid for the contract. 1040a form Report any taxable distributions on insurance policies on Form 1040, line 21. 1040a form Dividends on veterans' insurance. 1040a form Dividends you receive on veterans' insurance policies are not taxable. 1040a form In addition, interest on dividends left with the Department of Veterans Affairs is not taxable. 1040a form Patronage dividends. 1040a form Generally, patronage dividends you receive in money from a cooperative organization are included in your income. 1040a form 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. 1040a form But you must reduce the basis (cost) of the items bought. 1040a form If the dividend is more than the adjusted basis of the assets, you must report the excess as income. 1040a form These rules are the same whether the cooperative paying the dividend is a taxable or tax-exempt cooperative. 1040a form Alaska Permanent Fund dividends. 1040a form Do not report these amounts as dividends. 1040a form Instead, report these amounts on Form 1040, line 21; Form 1040A, line 13; or Form 1040EZ, line 3. 1040a form How To Report Dividend Income Generally, you can use either Form 1040 or Form 1040A to report your dividend income. 1040a form Report the total of your ordinary dividends on line 9a of Form 1040 or Form 1040A. 1040a form Report qualified dividends on line 9b of Form 1040 or Form 1040A. 1040a form If you receive capital gain distributions, you may be able to use Form 1040A or you may have to use Form 1040. 1040a form See Exceptions to filing Form 8949 and Schedule D (Form 1040) in chapter 16. 1040a form If you receive nondividend distributions required to be reported as capital gains, you must use Form 1040. 1040a form You cannot use Form 1040EZ if you receive any dividend income. 1040a form Form 1099-DIV. 1040a form If you owned stock on which you received $10 or more in dividends and other distributions, you should receive a Form 1099-DIV. 1040a form Even if you do not receive Form 1099-DIV, you must report all your dividend income. 1040a form See Form 1099-DIV for more information on how to report dividend income. 1040a form Form 1040A or 1040. 1040a form 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. 1040a form If your ordinary dividends are more than $1,500, you must also complete Schedule B (Form 1040A or 1040), Part III. 1040a form List on Schedule B (Form 1040A or 1040), Part II, line 5, each payer's name and the ordinary dividends you received. 1040a form 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. 1040a form 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. 1040a form Enter on line 6 the total of the amounts listed on line 5. 1040a form Also enter this total on line 9a of Form 1040A or 1040. 1040a form Qualified dividends. 1040a form Report qualified dividends (Form 1099-DIV, box 1b) on line 9b of Form 1040 or Form 1040A. 1040a form The amount in box 1b is already included in box 1a. 1040a form Do not add the amount in box 1b to, or substract it from, the amount in box 1a. 1040a form Do not include any of the following on line 9b. 1040a form Qualified dividends you received as a nominee. 1040a form See Nominees under How to Report Dividend Income in chapter 1 of Publication 550. 1040a form Dividends on stock for which you did not meet the holding period. 1040a form See Holding period , earlier under Qualified Dividends. 1040a form 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. 1040a form Payments in lieu of dividends, but only if you know or have reason to know the payments are not qualified dividends. 1040a form 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. 1040a form 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. 1040a form Enter qualified dividends on line 2 of the worksheet. 1040a form Investment interest deducted. 1040a form 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. 1040a form Reduce it by the qualified dividends you choose to include in investment income when figuring the limit on your investment interest deduction. 1040a form This is done on the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet. 1040a form For more information about the limit on investment interest, see Investment expenses in chapter 23. 1040a form Expenses related to dividend income. 1040a form You may be able to deduct expenses related to dividend income if you itemize your deductions on Schedule A (Form 1040). 1040a form See chapter 28 for general information about deducting expenses of producing income. 1040a form More information. 1040a form For more information about how to report dividend income, see chapter 1 of Publication 550 or the instructions for the form you must file. 1040a form Prev Up Next Home More Online Publications