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Free Tax Filing 2013

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Free Tax Filing 2013

Free tax filing 2013 Publication 542 - Introductory Material Table of Contents Introduction Useful Items - You may want to see: Photographs of missing children. Free tax filing 2013  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Free tax filing 2013 Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Free tax filing 2013 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. Free tax filing 2013 Introduction This publication discusses the general tax laws that apply to ordinary domestic corporations. Free tax filing 2013 It explains the tax law in plain language so it will be easier to understand. Free tax filing 2013 However, the information given does not cover every situation and is not intended to replace the law or change its meaning. Free tax filing 2013 Note. Free tax filing 2013 This publication is not revised on an annual basis. Free tax filing 2013 To find changes that may affect current year returns, see the instructions for your income tax return for the current year; and Changes to Current Forms and Publications at www. Free tax filing 2013 irs. Free tax filing 2013 gov/formspubs. Free tax filing 2013 Comments and suggestions. Free tax filing 2013   We welcome your comments about this publication and your suggestions for future editions. Free tax filing 2013   You can write to us at the following address: Internal Revenue Service Business, Exempt Organizations and International Forms and Publications Branch SE:W:CAR:MP:T:B 1111 Constitution Ave. Free tax filing 2013 NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Free tax filing 2013 Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Free tax filing 2013   You can email us at *taxforms@irs. Free tax filing 2013 gov (The asterisk must be included in the address). Free tax filing 2013 Please put “Publications Comment” on the subject line. Free tax filing 2013 You can also send us comments at www. Free tax filing 2013 irs. Free tax filing 2013 gov/formspubs/. Free tax filing 2013 Select “Comment on Tax Forms and Publications” under “Information about. Free tax filing 2013 ” Although we cannot respond individually to each comment, we do appreciate your feedback and will consider your comments as we revise our tax products. Free tax filing 2013 Tax questions. Free tax filing 2013   If you have a tax question, visit IRS. Free tax filing 2013 gov or call 1-800-829-1040. Free tax filing 2013 We cannot answer tax questions at either of the addresses listed above. Free tax filing 2013 Ordering forms and publications. Free tax filing 2013   Visit www. Free tax filing 2013 irs. Free tax filing 2013 gov/formspubs to download forms and publications, call 1-800-829-3676, or write to the National Distribution Center at the address shown under How to Get Tax Help, later in this publication. Free tax filing 2013 Additional forms. Free tax filing 2013   A list of other forms and statements that a corporation may need to file is included at the end of this publication. Free tax filing 2013 Useful Items - You may want to see: Publication 510 Excise Taxes (Including Fuel Tax Credits and Refunds) 535 Business Expenses 538 Accounting Periods and Methods 544 Sales and Other Dispositions of Assets 550 Investment Income and Expenses 925 Passive Activity and At-Risk Rules 946 How to Depreciate Property Prev  Up  Next   Home   More Online Publications
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Free tax filing 2013 8. Free tax filing 2013   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 filing 2013 Reporting tax withheld. Free tax filing 2013 Nominees. Free tax filing 2013 Ordinary DividendsQualified Dividends Dividends Used to Buy More Stock Money Market Funds Capital Gain DistributionsBasis adjustment. Free tax filing 2013 Nondividend DistributionsLiquidating Distributions Distributions of Stock and Stock Rights Other DistributionsInformation reporting requirement. Free tax filing 2013 Alternative minimum tax treatment. Free tax filing 2013 How To Report Dividend IncomeInvestment interest deducted. Free tax filing 2013 Reminder Foreign-source income. Free tax filing 2013  If you are a U. Free tax filing 2013 S. Free tax filing 2013 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 filing 2013 S. Free tax filing 2013 law. Free tax filing 2013 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 filing 2013 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 filing 2013 This chapter also explains how to report dividend income on your tax return. Free tax filing 2013 Dividends are distributions of money, stock, or other property paid to you by a corporation or by a mutual fund. Free tax filing 2013 You also may receive dividends through a partnership, an estate, a trust, or an association that is taxed as a corporation. Free tax filing 2013 However, some amounts you receive that are called dividends are actually interest income. Free tax filing 2013 (See Dividends that are actually interest under Taxable Interest in chapter 7. Free tax filing 2013 ) Most distributions are paid in cash (or check). Free tax filing 2013 However, distributions can consist of more stock, stock rights, other property, or services. Free tax filing 2013 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 filing 2013 Tax on unearned income of certain children. Free tax filing 2013   Part of a child's 2013 unearned income may be taxed at the parent's tax rate. Free tax filing 2013 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 filing 2013 If not, Form 8615 is not required and the child's income is taxed at his or her own tax rate. Free tax filing 2013    Some parents can choose to include the child's interest and dividends on the parent's return if certain requirements are met. Free tax filing 2013 Use Form 8814, Parents' Election To Report Child's Interest and Dividends, for this purpose. Free tax filing 2013   For more information about the tax on unearned income of children and the parents' election, see chapter 31. Free tax filing 2013 Beneficiary of an estate or trust. Free tax filing 2013    Dividends and other distributions you receive as a beneficiary of an estate or trust are generally taxable income. Free tax filing 2013 You should receive a Schedule K-1 (Form 1041), Beneficiary's Share of Income, Deductions, Credits, etc. Free tax filing 2013 , from the fiduciary. Free tax filing 2013 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 filing 2013 Social security number (SSN) or individual taxpayer identification number (ITIN). Free tax filing 2013    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 filing 2013 This includes payers of dividends. Free tax filing 2013 If you do not give your SSN or ITIN to the payer of dividends, you may have to pay a penalty. Free tax filing 2013 For more information on SSNs and ITINs, see Social Security Number (SSN) in chapter 1. Free tax filing 2013 Backup withholding. Free tax filing 2013   Your dividend income is generally not subject to regular withholding. Free tax filing 2013 However, it may be subject to backup withholding to ensure that income tax is collected on the income. Free tax filing 2013 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 filing 2013   Backup withholding may also be required if the IRS has determined that you underreported your interest or dividend income. Free tax filing 2013 For more information, see Backup Withholding in chapter 4. Free tax filing 2013 Stock certificate in two or more names. Free tax filing 2013   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 filing 2013 Form 1099-DIV. Free tax filing 2013   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 filing 2013 Keep this form with your records. Free tax filing 2013 You do not have to attach it to your tax return. Free tax filing 2013 Dividends not reported on Form 1099-DIV. Free tax filing 2013   Even if you do not receive Form 1099-DIV, you must still report all your taxable dividend income. Free tax filing 2013 For example, you may receive distributive shares of dividends from partnerships or S corporations. Free tax filing 2013 These dividends are reported to you on Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. Free tax filing 2013 , and Schedule K-1 (Form 1120S), Shareholder's Share of Income, Deductions, Credits, etc. Free tax filing 2013 Reporting tax withheld. Free tax filing 2013   If tax is withheld from your dividend income, the payer must give you a Form 1099-DIV that indicates the amount withheld. Free tax filing 2013 Nominees. Free tax filing 2013   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 filing 2013 Form 1099-MISC. Free tax filing 2013   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 filing 2013 See Reporting Substitute Payments under Short Sales in chapter 4 of Publication 550 for more information about reporting these payments. Free tax filing 2013 Incorrect amount shown on a Form 1099. Free tax filing 2013   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 filing 2013 The new Form 1099 you receive will be marked “Corrected. Free tax filing 2013 ” Dividends on stock sold. Free tax filing 2013   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 filing 2013 Dividends received in January. Free tax filing 2013   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 filing 2013 You report the dividend in the year it was declared. Free tax filing 2013 Ordinary Dividends Ordinary (taxable) dividends are the most common type of distribution from a corporation or a mutual fund. Free tax filing 2013 They are paid out of earnings and profits and are ordinary income to you. Free tax filing 2013 This means they are not capital gains. Free tax filing 2013 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 filing 2013 Ordinary dividends will be shown in box 1a of the Form 1099-DIV you receive. Free tax filing 2013 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 filing 2013 They should be shown in box 1b of the Form 1099-DIV you receive. Free tax filing 2013 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 filing 2013 15% on any amount that otherwise would be taxed at rates greater than 15% but less than 39. Free tax filing 2013 6%. Free tax filing 2013 20% on any amount that otherwise would be taxed at a 39. Free tax filing 2013 6% rate. Free tax filing 2013 To qualify for the maximum rate, all of the following requirements must be met. Free tax filing 2013 The dividends must have been paid by a U. Free tax filing 2013 S. Free tax filing 2013 corporation or a qualified foreign corporation. Free tax filing 2013 (See Qualified foreign corporation , later. Free tax filing 2013 ) The dividends are not of the type listed later under Dividends that are not qualified dividends . Free tax filing 2013 You meet the holding period (discussed next). Free tax filing 2013 Holding period. Free tax filing 2013   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 filing 2013 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 filing 2013 Instead, the seller will get the dividend. Free tax filing 2013   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 filing 2013 See the examples later. Free tax filing 2013 Exception for preferred stock. Free tax filing 2013   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 filing 2013 If the preferred dividends are due to periods totaling less than 367 days, the holding period in the previous paragraph applies. Free tax filing 2013 Example 1. Free tax filing 2013 You bought 5,000 shares of XYZ Corp. Free tax filing 2013 common stock on July 9, 2013. Free tax filing 2013 XYZ Corp. Free tax filing 2013 paid a cash dividend of 10 cents per share. Free tax filing 2013 The ex-dividend date was July 16, 2013. Free tax filing 2013 Your Form 1099-DIV from XYZ Corp. Free tax filing 2013 shows $500 in box 1a (ordinary dividends) and in box 1b (qualified dividends). Free tax filing 2013 However, you sold the 5,000 shares on August 12, 2013. Free tax filing 2013 You held your shares of XYZ Corp. Free tax filing 2013 for only 34 days of the 121-day period (from July 10, 2013, through August 12, 2013). Free tax filing 2013 The 121-day period began on May 17, 2013 (60 days before the ex-dividend date), and ended on September 14, 2013. Free tax filing 2013 You have no qualified dividends from XYZ Corp. Free tax filing 2013 because you held the XYZ stock for less than 61 days. Free tax filing 2013 Example 2. Free tax filing 2013 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 filing 2013 You held the stock for 63 days (from July 16, 2013, through September 16, 2013). Free tax filing 2013 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 filing 2013 Example 3. Free tax filing 2013 You bought 10,000 shares of ABC Mutual Fund common stock on July 9, 2013. Free tax filing 2013 ABC Mutual Fund paid a cash dividend of 10 cents a share. Free tax filing 2013 The ex-dividend date was July 16, 2013. Free tax filing 2013 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 filing 2013 Your Form 1099-DIV from ABC Mutual Fund shows total ordinary dividends of $1,000 and qualified dividends of $200. Free tax filing 2013 However, you sold the 10,000 shares on August 12, 2013. Free tax filing 2013 You have no qualified dividends from ABC Mutual Fund because you held the ABC Mutual Fund stock for less than 61 days. Free tax filing 2013 Holding period reduced where risk of loss is diminished. Free tax filing 2013   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 filing 2013 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 filing 2013 You were grantor (writer) of an option to buy substantially identical stock or securities. Free tax filing 2013 Your risk of loss is diminished by holding one or more other positions in substantially similar or related property. Free tax filing 2013   For information about how to apply condition (3), see Regulations section 1. Free tax filing 2013 246-5. Free tax filing 2013 Qualified foreign corporation. Free tax filing 2013   A foreign corporation is a qualified foreign corporation if it meets any of the following conditions. Free tax filing 2013 The corporation is incorporated in a U. Free tax filing 2013 S. Free tax filing 2013 possession. Free tax filing 2013 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 filing 2013 For a list of those treaties, see Table 8-1. Free tax filing 2013 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 filing 2013 See Readily tradable stock , later. Free tax filing 2013 Exception. Free tax filing 2013   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 filing 2013 Readily tradable stock. Free tax filing 2013   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 filing 2013 For a list of the exchanges that meet these requirements, see www. Free tax filing 2013 sec. Free tax filing 2013 gov/divisions/marketreg/mrexchanges. Free tax filing 2013 shtml. Free tax filing 2013 Dividends that are not qualified dividends. Free tax filing 2013   The following dividends are not qualified dividends. Free tax filing 2013 They are not qualified dividends even if they are shown in box 1b of Form 1099-DIV. Free tax filing 2013 Capital gain distributions. Free tax filing 2013 Dividends paid on deposits with mutual savings banks, cooperative banks, credit unions, U. Free tax filing 2013 S. Free tax filing 2013 building and loan associations, U. Free tax filing 2013 S. Free tax filing 2013 savings and loan associations, federal savings and loan associations, and similar financial institutions. Free tax filing 2013 (Report these amounts as interest income. Free tax filing 2013 ) 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 filing 2013 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 filing 2013 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 filing 2013 Payments in lieu of dividends, but only if you know or have reason to know the payments are not qualified dividends. Free tax filing 2013 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 filing 2013 Table 8-1. Free tax filing 2013 Income Tax Treaties Income tax treaties the United States has with the following countries satisfy requirement (2) under Qualified foreign corporation. Free tax filing 2013 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 filing 2013 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 filing 2013 Most mutual funds also permit shareholders to automatically reinvest distributions in more shares in the fund, instead of receiving cash. Free tax filing 2013 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 filing 2013 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 filing 2013 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 filing 2013 But you may be able to deduct the service charge. Free tax filing 2013 See chapter 28 for more information about deducting expenses of producing income. Free tax filing 2013 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 filing 2013 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 filing 2013 When figuring this amount, use the fair market value of the stock on the dividend payment date. Free tax filing 2013 Money Market Funds Report amounts you receive from money market funds as dividend income. Free tax filing 2013 Money market funds are a type of mutual fund and should not be confused with bank money market accounts that pay interest. Free tax filing 2013 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 filing 2013 They will be shown in box 2a of the Form 1099-DIV you receive from the mutual fund or REIT. Free tax filing 2013 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 filing 2013 Undistributed capital gains of mutual funds and REITs. Free tax filing 2013    Some mutual funds and REITs keep their long-term capital gains and pay tax on them. Free tax filing 2013 You must treat your share of these gains as distributions, even though you did not actually receive them. Free tax filing 2013 However, they are not included on Form 1099-DIV. Free tax filing 2013 Instead, they are reported to you in box 1a of Form 2439. Free tax filing 2013   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 filing 2013   The tax paid on these gains by the mutual fund or REIT is shown in box 2 of Form 2439. Free tax filing 2013 You take credit for this tax by including it on Form 1040, line 71, and checking box a on that line. Free tax filing 2013 Attach Copy B of Form 2439 to your return, and keep Copy C for your records. Free tax filing 2013 Basis adjustment. Free tax filing 2013   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 filing 2013 Additional information. Free tax filing 2013   For more information on the treatment of distributions from mutual funds, see Publication 550. Free tax filing 2013 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 filing 2013 You should receive a Form 1099-DIV or other statement showing the nondividend distribution. Free tax filing 2013 On Form 1099-DIV, a nondividend distribution will be shown in box 3. Free tax filing 2013 If you do not receive such a statement, you report the distribution as an ordinary dividend. Free tax filing 2013 Basis adjustment. Free tax filing 2013   A nondividend distribution reduces the basis of your stock. Free tax filing 2013 It is not taxed until your basis in the stock is fully recovered. Free tax filing 2013 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 filing 2013 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 filing 2013   When the basis of your stock has been reduced to zero, report any additional nondividend distribution you receive as a capital gain. Free tax filing 2013 Whether you report it as a long-term or short-term capital gain depends on how long you have held the stock. Free tax filing 2013 See Holding Period in chapter 14. Free tax filing 2013 Example. Free tax filing 2013 You bought stock in 2000 for $100. Free tax filing 2013 In 2003, you received a nondividend distribution of $80. Free tax filing 2013 You did not include this amount in your income, but you reduced the basis of your stock to $20. Free tax filing 2013 You received a nondividend distribution of $30 in 2013. Free tax filing 2013 The first $20 of this amount reduced your basis to zero. Free tax filing 2013 You report the other $10 as a long-term capital gain for 2013. Free tax filing 2013 You must report as a long-term capital gain any nondividend distribution you receive on this stock in later years. Free tax filing 2013 Liquidating Distributions Liquidating distributions, sometimes called liquidating dividends, are distributions you receive during a partial or complete liquidation of a corporation. Free tax filing 2013 These distributions are, at least in part, one form of a return of capital. Free tax filing 2013 They may be paid in one or more installments. Free tax filing 2013 You will receive Form 1099-DIV from the corporation showing you the amount of the liquidating distribution in box 8 or 9. Free tax filing 2013 For more information on liquidating distributions, see chapter 1 of Publication 550. Free tax filing 2013 Distributions of Stock and Stock Rights Distributions by a corporation of its own stock are commonly known as stock dividends. Free tax filing 2013 Stock rights (also known as “stock options”) are distributions by a corporation of rights to acquire the corporation's stock. Free tax filing 2013 Generally, stock dividends and stock rights are not taxable to you, and you do not report them on your return. Free tax filing 2013 Taxable stock dividends and stock rights. Free tax filing 2013   Distributions of stock dividends and stock rights are taxable to you if any of the following apply. Free tax filing 2013 You or any other shareholder have the choice to receive cash or other property instead of stock or stock rights. Free tax filing 2013 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 filing 2013 The distribution is in convertible preferred stock and has the same result as in (2). Free tax filing 2013 The distribution gives preferred stock to some common stock shareholders and common stock to other common stock shareholders. Free tax filing 2013 The distribution is on preferred stock. Free tax filing 2013 (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 filing 2013 )   The term “stock” includes rights to acquire stock, and the term “shareholder” includes a holder of rights or of convertible securities. Free tax filing 2013 If you receive taxable stock dividends or stock rights, include their fair market value at the time of distribution in your income. Free tax filing 2013 Preferred stock redeemable at a premium. Free tax filing 2013   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 filing 2013 For more information, see chapter 1 of Publication 550. Free tax filing 2013 Basis. Free tax filing 2013   Your basis in stock or stock rights received in a taxable distribution is their fair market value when distributed. Free tax filing 2013 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 filing 2013 Fractional shares. Free tax filing 2013    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 filing 2013 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 filing 2013 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 filing 2013 Report this transaction on Form 8949, Sales and Other Dispositions of Capital Assets. Free tax filing 2013 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 filing 2013    Report these transactions on Form 8949 with the correct box checked. Free tax filing 2013   For more information on Form 8949 and Schedule D (Form 1040), see chapter 4 of Publication 550. Free tax filing 2013 Also see the Instructions for Form 8949 and the Instructions for Schedule D (Form 1040). Free tax filing 2013 Example. Free tax filing 2013 You own one share of common stock that you bought on January 3, 2004, for $100. Free tax filing 2013 The corporation declared a common stock dividend of 5% on June 29, 2013. Free tax filing 2013 The fair market value of the stock at the time the stock dividend was declared was $200. Free tax filing 2013 You were paid $10 for the fractional-share stock dividend under a plan described in the discussion above. Free tax filing 2013 You figure your gain or loss as follows: Fair market value of old stock $200. Free tax filing 2013 00 Fair market value of stock dividend (cash received) +10. Free tax filing 2013 00 Fair market value of old stock and stock dividend $210. Free tax filing 2013 00 Basis (cost) of old stock after the stock dividend (($200 ÷ $210) × $100) $95. Free tax filing 2013 24 Basis (cost) of stock dividend (($10 ÷ $210) × $100) + 4. Free tax filing 2013 76 Total $100. Free tax filing 2013 00 Cash received $10. Free tax filing 2013 00 Basis (cost) of stock dividend − 4. Free tax filing 2013 76 Gain $5. Free tax filing 2013 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 filing 2013 Scrip dividends. Free tax filing 2013   A corporation that declares a stock dividend may issue you a scrip certificate that entitles you to a fractional share. Free tax filing 2013 The certificate is generally nontaxable when you receive it. Free tax filing 2013 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 filing 2013   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 filing 2013 You must include its fair market value in income on the date you receive it. Free tax filing 2013 Other Distributions You may receive any of the following distributions during the year. Free tax filing 2013 Exempt-interest dividends. Free tax filing 2013   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 filing 2013 Exempt-interest dividends should be shown in box 10 of Form 1099-DIV. Free tax filing 2013 Information reporting requirement. Free tax filing 2013   Although exempt-interest dividends are not taxable, you must show them on your tax return if you have to file a return. Free tax filing 2013 This is an information reporting requirement and does not change the exempt-interest dividends to taxable income. Free tax filing 2013 Alternative minimum tax treatment. Free tax filing 2013   Exempt-interest dividends paid from specified private activity bonds may be subject to the alternative minimum tax. Free tax filing 2013 See Alternative Minimum Tax (AMT) in chapter 30 for more information. Free tax filing 2013 Dividends on insurance policies. Free tax filing 2013    Insurance policy dividends the insurer keeps and uses to pay your premiums are not taxable. Free tax filing 2013 However, you must report as taxable interest income the interest that is paid or credited on dividends left with the insurance company. Free tax filing 2013    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 filing 2013 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 filing 2013 Report any taxable distributions on insurance policies on Form 1040, line 21. Free tax filing 2013 Dividends on veterans' insurance. Free tax filing 2013   Dividends you receive on veterans' insurance policies are not taxable. Free tax filing 2013 In addition, interest on dividends left with the Department of Veterans Affairs is not taxable. Free tax filing 2013 Patronage dividends. Free tax filing 2013   Generally, patronage dividends you receive in money from a cooperative organization are included in your income. Free tax filing 2013   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 filing 2013 But you must reduce the basis (cost) of the items bought. Free tax filing 2013 If the dividend is more than the adjusted basis of the assets, you must report the excess as income. Free tax filing 2013   These rules are the same whether the cooperative paying the dividend is a taxable or tax-exempt cooperative. Free tax filing 2013 Alaska Permanent Fund dividends. Free tax filing 2013    Do not report these amounts as dividends. Free tax filing 2013 Instead, report these amounts on Form 1040, line 21; Form 1040A, line 13; or Form 1040EZ, line 3. Free tax filing 2013 How To Report Dividend Income Generally, you can use either Form 1040 or Form 1040A to report your dividend income. Free tax filing 2013 Report the total of your ordinary dividends on line 9a of Form 1040 or Form 1040A. Free tax filing 2013 Report qualified dividends on line 9b of Form 1040 or Form 1040A. Free tax filing 2013 If you receive capital gain distributions, you may be able to use Form 1040A or you may have to use Form 1040. Free tax filing 2013 See Exceptions to filing Form 8949 and Schedule D (Form 1040) in chapter 16. Free tax filing 2013 If you receive nondividend distributions required to be reported as capital gains, you must use Form 1040. Free tax filing 2013 You cannot use Form 1040EZ if you receive any dividend income. Free tax filing 2013 Form 1099-DIV. Free tax filing 2013   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 filing 2013 Even if you do not receive Form 1099-DIV, you must report all your dividend income. Free tax filing 2013   See Form 1099-DIV for more information on how to report dividend income. Free tax filing 2013 Form 1040A or 1040. Free tax filing 2013    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 filing 2013 If your ordinary dividends are more than $1,500, you must also complete Schedule B (Form 1040A or 1040), Part III. Free tax filing 2013   List on Schedule B (Form 1040A or 1040), Part II, line 5, each payer's name and the ordinary dividends you received. Free tax filing 2013 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 filing 2013 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 filing 2013   Enter on line 6 the total of the amounts listed on line 5. Free tax filing 2013 Also enter this total on line 9a of Form 1040A or 1040. Free tax filing 2013 Qualified dividends. Free tax filing 2013   Report qualified dividends (Form 1099-DIV, box 1b) on line 9b of Form 1040 or Form 1040A. Free tax filing 2013 The amount in box 1b is already included in box 1a. Free tax filing 2013 Do not add the amount in box 1b to, or substract it from, the amount in box 1a. Free tax filing 2013   Do not include any of the following on line 9b. Free tax filing 2013 Qualified dividends you received as a nominee. Free tax filing 2013 See Nominees under How to Report Dividend Income in chapter 1 of Publication 550. Free tax filing 2013 Dividends on stock for which you did not meet the holding period. Free tax filing 2013 See Holding period , earlier under Qualified Dividends. Free tax filing 2013 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 filing 2013 Payments in lieu of dividends, but only if you know or have reason to know the payments are not qualified dividends. Free tax filing 2013 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 filing 2013   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 filing 2013 Enter qualified dividends on line 2 of the worksheet. Free tax filing 2013 Investment interest deducted. Free tax filing 2013   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 filing 2013 Reduce it by the qualified dividends you choose to include in investment income when figuring the limit on your investment interest deduction. Free tax filing 2013 This is done on the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet. Free tax filing 2013 For more information about the limit on investment interest, see Investment expenses in chapter 23. Free tax filing 2013 Expenses related to dividend income. Free tax filing 2013   You may be able to deduct expenses related to dividend income if you itemize your deductions on Schedule A (Form 1040). Free tax filing 2013 See chapter 28 for general information about deducting expenses of producing income. Free tax filing 2013 More information. Free tax filing 2013    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 filing 2013 Prev  Up  Next   Home   More Online Publications