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. 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 in the individual income tax return in TaxSlayer Pro, from the Main Menu of the tax return (Form 1040) select:
- Income
- 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:
- Income
- 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.
Additional Information: