A nondividend distribution is a distribution that is not paid out of the earnings and profits of a corporation or a mutual fund. Typically it is a return of the capital or the investment that was made by the owner of the corporation or mutual fund.
Nondividend distributions are typically reported to the taxpayer-shareholder on Form 1099-DIV and they are typically not taxable, however once the taxpayer's basis in the corporation has been reduced to zero any subsequent nondividend distribution is considered a capital gain and is reported on Form 8949 flowing to Schedule D. It's up to the taxpayer to keep track of their basis in the corporation, reducing it by any nondividend distributions.
To enter a nondividend distribution, from the Main Menu of the tax return (Form 1040) select:
- Interest or Dividends - Select New, then Form 1099-DIV
- Enter the Payer's name, then click Ok.
- Enter the amount in Nondividend Distributions
To enter a nondividend distribution received beyond the taxpayer's basis, from the Main Menu of the tax return (Form 1040) select:
- Capital Gain/Loss (Sch D) - Select New.
- Description of Property - Enter an appropriate description, e.g. nondividend distribution.
- Form 1099-B Type - Choose Form 1099-B Not received.
- Date Acquired - Enter the purchase date. If there are multiple dates, enter the most recent.
- Date Sold - Enter the date of the distribution.
- Sales Price - Enter the amount of the distribution.
- Cost - Enter 0.
Note: This is a guide on entering a nondividend distribution into the TaxSlayer Pro program. It is not intended as tax advice.