Support CenterNon-dividend Distributions (1099-DIV)
🔍 What is Non-dividend Distributions (1099-DIV)?
A non-dividend distribution is a distribution that is not paid out of the earnings and profits of a corporation or a mutual fund. You should receive a Form 1099-DIV or other statement showing the non-dividend distribution.
On Form 1099-DIV, a non-dividend distribution will be shown in box 3. If you do not receive such a statement, you report the distribution as an ordinary dividend.
⚠️ Before You Begin
You may need to:
- Review your Form 1099-DIV (or other statement) for non-dividend distributions.
- Confirm whether the amount is shown in box 3.
- If you did not receive a statement, treat the distribution as an ordinary dividend.
📚 Key Rules for Non-dividend Distributions
Step 1: Understand how non-dividend distributions affect your basis
Use this when you need to know whether the distribution is taxable right away.
Basis adjustment: A non-dividend distribution reduces the basis of your stock. It is not taxed until your basis in the stock is fully recovered.
This non-taxable portion is also called a return of capital; it is a return of your investment in the stock of the company.
If you buy stock in a corporation in different lots at different times, and you cannot definitely identify the shares subject to the non-dividend distribution, reduce the basis of your earliest purchases first.
Step 2: Know what happens after your basis reaches zero
Use this when you need to determine how to report additional non-dividend distributions.
When the basis of your stock has been reduced to zero, report any additional non-dividend distribution you receive as a capital gain.
Whether you report it as a long-term or short-term capital gain depends on how long you have held the stock. See Holding Period in chapter 14.
📊 Example
You bought stock in 2007 for $100. In 2010, you received a non-dividend distribution of $80. You did not include this amount in your income, but you reduced the basis of your stock to $20.
You received a non-dividend distribution of $30 in 2020. The first $20 of this amount reduced your basis to zero. You report the other $10 as a long-term capital gain for 2020.
You must report as a long-term capital gain any non-dividend distribution you receive on this stock in later years.
📞 Still Need Help?
If you are having trouble, contact our support team:
Phone: 1-800-516-9442
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