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2009 1040ez 8. 2009 1040ez Dividends and Other Distributions Table of Contents Reminder Introduction Useful Items - You may want to see: General InformationDividends not reported on Form 1099-DIV. 2009 1040ez Reporting tax withheld. 2009 1040ez Nominees. 2009 1040ez Ordinary DividendsQualified Dividends Dividends Used to Buy More Stock Money Market Funds Capital Gain DistributionsBasis adjustment. 2009 1040ez Nondividend DistributionsLiquidating Distributions Distributions of Stock and Stock Rights Other DistributionsInformation reporting requirement. 2009 1040ez Alternative minimum tax treatment. 2009 1040ez How To Report Dividend IncomeInvestment interest deducted. 2009 1040ez Reminder Foreign-source income. 2009 1040ez If you are a U. 2009 1040ez S. 2009 1040ez 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. 2009 1040ez S. 2009 1040ez law. 2009 1040ez 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. 2009 1040ez 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. 2009 1040ez This chapter also explains how to report dividend income on your tax return. 2009 1040ez Dividends are distributions of money, stock, or other property paid to you by a corporation or by a mutual fund. 2009 1040ez You also may receive dividends through a partnership, an estate, a trust, or an association that is taxed as a corporation. 2009 1040ez However, some amounts you receive that are called dividends are actually interest income. 2009 1040ez (See Dividends that are actually interest under Taxable Interest in chapter 7. 2009 1040ez ) Most distributions are paid in cash (or check). 2009 1040ez However, distributions can consist of more stock, stock rights, other property, or services. 2009 1040ez 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. 2009 1040ez Tax on unearned income of certain children. 2009 1040ez Part of a child's 2013 unearned income may be taxed at the parent's tax rate. 2009 1040ez If it is, Form 8615, Tax for Certain Children Who Have Unearned Income, must be completed and attached to the child's tax return. 2009 1040ez If not, Form 8615 is not required and the child's income is taxed at his or her own tax rate. 2009 1040ez Some parents can choose to include the child's interest and dividends on the parent's return if certain requirements are met. 2009 1040ez Use Form 8814, Parents' Election To Report Child's Interest and Dividends, for this purpose. 2009 1040ez For more information about the tax on unearned income of children and the parents' election, see chapter 31. 2009 1040ez Beneficiary of an estate or trust. 2009 1040ez Dividends and other distributions you receive as a beneficiary of an estate or trust are generally taxable income. 2009 1040ez You should receive a Schedule K-1 (Form 1041), Beneficiary's Share of Income, Deductions, Credits, etc. 2009 1040ez , from the fiduciary. 2009 1040ez Your copy of Schedule K-1 (Form 1041) and its instructions will tell you where to report the income on your Form 1040. 2009 1040ez Social security number (SSN) or individual taxpayer identification number (ITIN). 2009 1040ez 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. 2009 1040ez This includes payers of dividends. 2009 1040ez If you do not give your SSN or ITIN to the payer of dividends, you may have to pay a penalty. 2009 1040ez For more information on SSNs and ITINs, see Social Security Number (SSN) in chapter 1. 2009 1040ez Backup withholding. 2009 1040ez Your dividend income is generally not subject to regular withholding. 2009 1040ez However, it may be subject to backup withholding to ensure that income tax is collected on the income. 2009 1040ez Under backup withholding, the payer of dividends must withhold, as income tax, on the amount you are paid, applying the appropriate withholding rate. 2009 1040ez Backup withholding may also be required if the IRS has determined that you underreported your interest or dividend income. 2009 1040ez For more information, see Backup Withholding in chapter 4. 2009 1040ez Stock certificate in two or more names. 2009 1040ez 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. 2009 1040ez Form 1099-DIV. 2009 1040ez Most corporations and mutual funds use Form 1099-DIV, Dividends and Distributions, to show you the distributions you received from them during the year. 2009 1040ez Keep this form with your records. 2009 1040ez You do not have to attach it to your tax return. 2009 1040ez Dividends not reported on Form 1099-DIV. 2009 1040ez Even if you do not receive Form 1099-DIV, you must still report all your taxable dividend income. 2009 1040ez For example, you may receive distributive shares of dividends from partnerships or S corporations. 2009 1040ez These dividends are reported to you on Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. 2009 1040ez , and Schedule K-1 (Form 1120S), Shareholder's Share of Income, Deductions, Credits, etc. 2009 1040ez Reporting tax withheld. 2009 1040ez If tax is withheld from your dividend income, the payer must give you a Form 1099-DIV that indicates the amount withheld. 2009 1040ez Nominees. 2009 1040ez 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. 2009 1040ez Form 1099-MISC. 2009 1040ez 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. 2009 1040ez See Reporting Substitute Payments under Short Sales in chapter 4 of Publication 550 for more information about reporting these payments. 2009 1040ez Incorrect amount shown on a Form 1099. 2009 1040ez If you receive a Form 1099 that shows an incorrect amount (or other incorrect information), you should ask the issuer for a corrected form. 2009 1040ez The new Form 1099 you receive will be marked “Corrected. 2009 1040ez ” Dividends on stock sold. 2009 1040ez 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. 2009 1040ez Dividends received in January. 2009 1040ez 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. 2009 1040ez You report the dividend in the year it was declared. 2009 1040ez Ordinary Dividends Ordinary (taxable) dividends are the most common type of distribution from a corporation or a mutual fund. 2009 1040ez They are paid out of earnings and profits and are ordinary income to you. 2009 1040ez This means they are not capital gains. 2009 1040ez 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. 2009 1040ez Ordinary dividends will be shown in box 1a of the Form 1099-DIV you receive. 2009 1040ez 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. 2009 1040ez They should be shown in box 1b of the Form 1099-DIV you receive. 2009 1040ez The maximum rate of tax on qualified dividends is: 0% on any amount that otherwise would be taxed at a 10% or 15% rate. 2009 1040ez 15% on any amount that otherwise would be taxed at rates greater than 15% but less than 39. 2009 1040ez 6%. 2009 1040ez 20% on any amount that otherwise would be taxed at a 39. 2009 1040ez 6% rate. 2009 1040ez To qualify for the maximum rate, all of the following requirements must be met. 2009 1040ez The dividends must have been paid by a U. 2009 1040ez S. 2009 1040ez corporation or a qualified foreign corporation. 2009 1040ez (See Qualified foreign corporation , later. 2009 1040ez ) The dividends are not of the type listed later under Dividends that are not qualified dividends . 2009 1040ez You meet the holding period (discussed next). 2009 1040ez Holding period. 2009 1040ez 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. 2009 1040ez 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. 2009 1040ez Instead, the seller will get the dividend. 2009 1040ez 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. 2009 1040ez See the examples later. 2009 1040ez Exception for preferred stock. 2009 1040ez 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. 2009 1040ez If the preferred dividends are due to periods totaling less than 367 days, the holding period in the previous paragraph applies. 2009 1040ez Example 1. 2009 1040ez You bought 5,000 shares of XYZ Corp. 2009 1040ez common stock on July 9, 2013. 2009 1040ez XYZ Corp. 2009 1040ez paid a cash dividend of 10 cents per share. 2009 1040ez The ex-dividend date was July 16, 2013. 2009 1040ez Your Form 1099-DIV from XYZ Corp. 2009 1040ez shows $500 in box 1a (ordinary dividends) and in box 1b (qualified dividends). 2009 1040ez However, you sold the 5,000 shares on August 12, 2013. 2009 1040ez You held your shares of XYZ Corp. 2009 1040ez for only 34 days of the 121-day period (from July 10, 2013, through August 12, 2013). 2009 1040ez The 121-day period began on May 17, 2013 (60 days before the ex-dividend date), and ended on September 14, 2013. 2009 1040ez You have no qualified dividends from XYZ Corp. 2009 1040ez because you held the XYZ stock for less than 61 days. 2009 1040ez Example 2. 2009 1040ez 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. 2009 1040ez You held the stock for 63 days (from July 16, 2013, through September 16, 2013). 2009 1040ez 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). 2009 1040ez Example 3. 2009 1040ez You bought 10,000 shares of ABC Mutual Fund common stock on July 9, 2013. 2009 1040ez ABC Mutual Fund paid a cash dividend of 10 cents a share. 2009 1040ez The ex-dividend date was July 16, 2013. 2009 1040ez The ABC Mutual Fund advises you that the portion of the dividend eligible to be treated as qualified dividends equals 2 cents per share. 2009 1040ez Your Form 1099-DIV from ABC Mutual Fund shows total ordinary dividends of $1,000 and qualified dividends of $200. 2009 1040ez However, you sold the 10,000 shares on August 12, 2013. 2009 1040ez You have no qualified dividends from ABC Mutual Fund because you held the ABC Mutual Fund stock for less than 61 days. 2009 1040ez Holding period reduced where risk of loss is diminished. 2009 1040ez 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. 2009 1040ez 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. 2009 1040ez You were grantor (writer) of an option to buy substantially identical stock or securities. 2009 1040ez Your risk of loss is diminished by holding one or more other positions in substantially similar or related property. 2009 1040ez For information about how to apply condition (3), see Regulations section 1. 2009 1040ez 246-5. 2009 1040ez Qualified foreign corporation. 2009 1040ez A foreign corporation is a qualified foreign corporation if it meets any of the following conditions. 2009 1040ez The corporation is incorporated in a U. 2009 1040ez S. 2009 1040ez possession. 2009 1040ez 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. 2009 1040ez For a list of those treaties, see Table 8-1. 2009 1040ez 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. 2009 1040ez See Readily tradable stock , later. 2009 1040ez Exception. 2009 1040ez 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. 2009 1040ez Readily tradable stock. 2009 1040ez 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. 2009 1040ez For a list of the exchanges that meet these requirements, see www. 2009 1040ez sec. 2009 1040ez gov/divisions/marketreg/mrexchanges. 2009 1040ez shtml. 2009 1040ez Dividends that are not qualified dividends. 2009 1040ez The following dividends are not qualified dividends. 2009 1040ez They are not qualified dividends even if they are shown in box 1b of Form 1099-DIV. 2009 1040ez Capital gain distributions. 2009 1040ez Dividends paid on deposits with mutual savings banks, cooperative banks, credit unions, U. 2009 1040ez S. 2009 1040ez building and loan associations, U. 2009 1040ez S. 2009 1040ez savings and loan associations, federal savings and loan associations, and similar financial institutions. 2009 1040ez (Report these amounts as interest income. 2009 1040ez ) 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. 2009 1040ez 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. 2009 1040ez 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. 2009 1040ez Payments in lieu of dividends, but only if you know or have reason to know the payments are not qualified dividends. 2009 1040ez 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. 2009 1040ez Table 8-1. 2009 1040ez Income Tax Treaties Income tax treaties the United States has with the following countries satisfy requirement (2) under Qualified foreign corporation. 2009 1040ez 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. 2009 1040ez 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. 2009 1040ez Most mutual funds also permit shareholders to automatically reinvest distributions in more shares in the fund, instead of receiving cash. 2009 1040ez 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. 2009 1040ez 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. 2009 1040ez 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. 2009 1040ez But you may be able to deduct the service charge. 2009 1040ez See chapter 28 for more information about deducting expenses of producing income. 2009 1040ez In some dividend reinvestment plans, you can invest more cash to buy shares of stock at a price less than fair market value. 2009 1040ez 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. 2009 1040ez When figuring this amount, use the fair market value of the stock on the dividend payment date. 2009 1040ez Money Market Funds Report amounts you receive from money market funds as dividend income. 2009 1040ez Money market funds are a type of mutual fund and should not be confused with bank money market accounts that pay interest. 2009 1040ez 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). 2009 1040ez They will be shown in box 2a of the Form 1099-DIV you receive from the mutual fund or REIT. 2009 1040ez Report capital gain distributions as long-term capital gains, regardless of how long you owned your shares in the mutual fund or REIT. 2009 1040ez Undistributed capital gains of mutual funds and REITs. 2009 1040ez Some mutual funds and REITs keep their long-term capital gains and pay tax on them. 2009 1040ez You must treat your share of these gains as distributions, even though you did not actually receive them. 2009 1040ez However, they are not included on Form 1099-DIV. 2009 1040ez Instead, they are reported to you in box 1a of Form 2439. 2009 1040ez Report undistributed capital gains (box 1a of Form 2439) as long-term capital gains on Schedule D (Form 1040), column (h), line 11. 2009 1040ez The tax paid on these gains by the mutual fund or REIT is shown in box 2 of Form 2439. 2009 1040ez You take credit for this tax by including it on Form 1040, line 71, and checking box a on that line. 2009 1040ez Attach Copy B of Form 2439 to your return, and keep Copy C for your records. 2009 1040ez Basis adjustment. 2009 1040ez 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. 2009 1040ez Additional information. 2009 1040ez For more information on the treatment of distributions from mutual funds, see Publication 550. 2009 1040ez 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. 2009 1040ez You should receive a Form 1099-DIV or other statement showing the nondividend distribution. 2009 1040ez On Form 1099-DIV, a nondividend distribution will be shown in box 3. 2009 1040ez If you do not receive such a statement, you report the distribution as an ordinary dividend. 2009 1040ez Basis adjustment. 2009 1040ez A nondividend distribution reduces the basis of your stock. 2009 1040ez It is not taxed until your basis in the stock is fully recovered. 2009 1040ez This nontaxable portion is also called a return of capital; it is a return of your investment in the stock of the company. 2009 1040ez 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. 2009 1040ez When the basis of your stock has been reduced to zero, report any additional nondividend distribution you receive as a capital gain. 2009 1040ez Whether you report it as a long-term or short-term capital gain depends on how long you have held the stock. 2009 1040ez See Holding Period in chapter 14. 2009 1040ez Example. 2009 1040ez You bought stock in 2000 for $100. 2009 1040ez In 2003, you received a nondividend distribution of $80. 2009 1040ez You did not include this amount in your income, but you reduced the basis of your stock to $20. 2009 1040ez You received a nondividend distribution of $30 in 2013. 2009 1040ez The first $20 of this amount reduced your basis to zero. 2009 1040ez You report the other $10 as a long-term capital gain for 2013. 2009 1040ez You must report as a long-term capital gain any nondividend distribution you receive on this stock in later years. 2009 1040ez Liquidating Distributions Liquidating distributions, sometimes called liquidating dividends, are distributions you receive during a partial or complete liquidation of a corporation. 2009 1040ez These distributions are, at least in part, one form of a return of capital. 2009 1040ez They may be paid in one or more installments. 2009 1040ez You will receive Form 1099-DIV from the corporation showing you the amount of the liquidating distribution in box 8 or 9. 2009 1040ez For more information on liquidating distributions, see chapter 1 of Publication 550. 2009 1040ez Distributions of Stock and Stock Rights Distributions by a corporation of its own stock are commonly known as stock dividends. 2009 1040ez Stock rights (also known as “stock options”) are distributions by a corporation of rights to acquire the corporation's stock. 2009 1040ez Generally, stock dividends and stock rights are not taxable to you, and you do not report them on your return. 2009 1040ez Taxable stock dividends and stock rights. 2009 1040ez Distributions of stock dividends and stock rights are taxable to you if any of the following apply. 2009 1040ez You or any other shareholder have the choice to receive cash or other property instead of stock or stock rights. 2009 1040ez 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. 2009 1040ez The distribution is in convertible preferred stock and has the same result as in (2). 2009 1040ez The distribution gives preferred stock to some common stock shareholders and common stock to other common stock shareholders. 2009 1040ez The distribution is on preferred stock. 2009 1040ez (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. 2009 1040ez ) The term “stock” includes rights to acquire stock, and the term “shareholder” includes a holder of rights or of convertible securities. 2009 1040ez If you receive taxable stock dividends or stock rights, include their fair market value at the time of distribution in your income. 2009 1040ez Preferred stock redeemable at a premium. 2009 1040ez 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. 2009 1040ez For more information, see chapter 1 of Publication 550. 2009 1040ez Basis. 2009 1040ez Your basis in stock or stock rights received in a taxable distribution is their fair market value when distributed. 2009 1040ez 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. 2009 1040ez Fractional shares. 2009 1040ez You may not own enough stock in a corporation to receive a full share of stock if the corporation declares a stock dividend. 2009 1040ez 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. 2009 1040ez Any cash you receive for fractional shares under such a plan is treated as an amount realized on the sale of the fractional shares. 2009 1040ez Report this transaction on Form 8949, Sales and Other Dispositions of Capital Assets. 2009 1040ez 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. 2009 1040ez Report these transactions on Form 8949 with the correct box checked. 2009 1040ez For more information on Form 8949 and Schedule D (Form 1040), see chapter 4 of Publication 550. 2009 1040ez Also see the Instructions for Form 8949 and the Instructions for Schedule D (Form 1040). 2009 1040ez Example. 2009 1040ez You own one share of common stock that you bought on January 3, 2004, for $100. 2009 1040ez The corporation declared a common stock dividend of 5% on June 29, 2013. 2009 1040ez The fair market value of the stock at the time the stock dividend was declared was $200. 2009 1040ez You were paid $10 for the fractional-share stock dividend under a plan described in the discussion above. 2009 1040ez You figure your gain or loss as follows: Fair market value of old stock $200. 2009 1040ez 00 Fair market value of stock dividend (cash received) +10. 2009 1040ez 00 Fair market value of old stock and stock dividend $210. 2009 1040ez 00 Basis (cost) of old stock after the stock dividend (($200 ÷ $210) × $100) $95. 2009 1040ez 24 Basis (cost) of stock dividend (($10 ÷ $210) × $100) + 4. 2009 1040ez 76 Total $100. 2009 1040ez 00 Cash received $10. 2009 1040ez 00 Basis (cost) of stock dividend − 4. 2009 1040ez 76 Gain $5. 2009 1040ez 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. 2009 1040ez Scrip dividends. 2009 1040ez A corporation that declares a stock dividend may issue you a scrip certificate that entitles you to a fractional share. 2009 1040ez The certificate is generally nontaxable when you receive it. 2009 1040ez 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. 2009 1040ez 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. 2009 1040ez You must include its fair market value in income on the date you receive it. 2009 1040ez Other Distributions You may receive any of the following distributions during the year. 2009 1040ez Exempt-interest dividends. 2009 1040ez 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. 2009 1040ez Exempt-interest dividends should be shown in box 10 of Form 1099-DIV. 2009 1040ez Information reporting requirement. 2009 1040ez Although exempt-interest dividends are not taxable, you must show them on your tax return if you have to file a return. 2009 1040ez This is an information reporting requirement and does not change the exempt-interest dividends to taxable income. 2009 1040ez Alternative minimum tax treatment. 2009 1040ez Exempt-interest dividends paid from specified private activity bonds may be subject to the alternative minimum tax. 2009 1040ez See Alternative Minimum Tax (AMT) in chapter 30 for more information. 2009 1040ez Dividends on insurance policies. 2009 1040ez Insurance policy dividends the insurer keeps and uses to pay your premiums are not taxable. 2009 1040ez However, you must report as taxable interest income the interest that is paid or credited on dividends left with the insurance company. 2009 1040ez 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. 2009 1040ez Do not include them in your gross income until they are more than the total of all net premiums you paid for the contract. 2009 1040ez Report any taxable distributions on insurance policies on Form 1040, line 21. 2009 1040ez Dividends on veterans' insurance. 2009 1040ez Dividends you receive on veterans' insurance policies are not taxable. 2009 1040ez In addition, interest on dividends left with the Department of Veterans Affairs is not taxable. 2009 1040ez Patronage dividends. 2009 1040ez Generally, patronage dividends you receive in money from a cooperative organization are included in your income. 2009 1040ez 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. 2009 1040ez But you must reduce the basis (cost) of the items bought. 2009 1040ez If the dividend is more than the adjusted basis of the assets, you must report the excess as income. 2009 1040ez These rules are the same whether the cooperative paying the dividend is a taxable or tax-exempt cooperative. 2009 1040ez Alaska Permanent Fund dividends. 2009 1040ez Do not report these amounts as dividends. 2009 1040ez Instead, report these amounts on Form 1040, line 21; Form 1040A, line 13; or Form 1040EZ, line 3. 2009 1040ez How To Report Dividend Income Generally, you can use either Form 1040 or Form 1040A to report your dividend income. 2009 1040ez Report the total of your ordinary dividends on line 9a of Form 1040 or Form 1040A. 2009 1040ez Report qualified dividends on line 9b of Form 1040 or Form 1040A. 2009 1040ez If you receive capital gain distributions, you may be able to use Form 1040A or you may have to use Form 1040. 2009 1040ez See Exceptions to filing Form 8949 and Schedule D (Form 1040) in chapter 16. 2009 1040ez If you receive nondividend distributions required to be reported as capital gains, you must use Form 1040. 2009 1040ez You cannot use Form 1040EZ if you receive any dividend income. 2009 1040ez Form 1099-DIV. 2009 1040ez If you owned stock on which you received $10 or more in dividends and other distributions, you should receive a Form 1099-DIV. 2009 1040ez Even if you do not receive Form 1099-DIV, you must report all your dividend income. 2009 1040ez See Form 1099-DIV for more information on how to report dividend income. 2009 1040ez Form 1040A or 1040. 2009 1040ez 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. 2009 1040ez If your ordinary dividends are more than $1,500, you must also complete Schedule B (Form 1040A or 1040), Part III. 2009 1040ez List on Schedule B (Form 1040A or 1040), Part II, line 5, each payer's name and the ordinary dividends you received. 2009 1040ez 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. 2009 1040ez 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. 2009 1040ez Enter on line 6 the total of the amounts listed on line 5. 2009 1040ez Also enter this total on line 9a of Form 1040A or 1040. 2009 1040ez Qualified dividends. 2009 1040ez Report qualified dividends (Form 1099-DIV, box 1b) on line 9b of Form 1040 or Form 1040A. 2009 1040ez The amount in box 1b is already included in box 1a. 2009 1040ez Do not add the amount in box 1b to, or substract it from, the amount in box 1a. 2009 1040ez Do not include any of the following on line 9b. 2009 1040ez Qualified dividends you received as a nominee. 2009 1040ez See Nominees under How to Report Dividend Income in chapter 1 of Publication 550. 2009 1040ez Dividends on stock for which you did not meet the holding period. 2009 1040ez See Holding period , earlier under Qualified Dividends. 2009 1040ez 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. 2009 1040ez Payments in lieu of dividends, but only if you know or have reason to know the payments are not qualified dividends. 2009 1040ez 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. 2009 1040ez 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. 2009 1040ez Enter qualified dividends on line 2 of the worksheet. 2009 1040ez Investment interest deducted. 2009 1040ez 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. 2009 1040ez Reduce it by the qualified dividends you choose to include in investment income when figuring the limit on your investment interest deduction. 2009 1040ez This is done on the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet. 2009 1040ez For more information about the limit on investment interest, see Investment expenses in chapter 23. 2009 1040ez Expenses related to dividend income. 2009 1040ez You may be able to deduct expenses related to dividend income if you itemize your deductions on Schedule A (Form 1040). 2009 1040ez See chapter 28 for general information about deducting expenses of producing income. 2009 1040ez More information. 2009 1040ez For more information about how to report dividend income, see chapter 1 of Publication 550 or the instructions for the form you must file. 2009 1040ez Prev Up Next Home More Online Publications
Understanding Your CP54G Notice
Your tax return shows a different name and/or ID number from the information we have for your account. Please provide the requested information.
What you need to do
- Review your identifying information shown on this notice and compare it to your most recent social security card or taxpayer ID card.
- Complete the CP54 response form to explain the discrepancies.
- Include copies of documents to substantiate your name and identifying number.
You may want to
- Contact the SSA to update your records if any of the following occurred:
- you recently married and are using your spouse’s last name and have not already contacted SSA,
- you legally changed your name without contacting SSA, or
- your social security number (SSN) and/or name are different than on your social security card.
Tips for next year
ake sure you file using your name and taxpayer ID number as they appear on your social security card or taxpayer ID card.
Page Last Reviewed or Updated: 23-Jan-2014
Printable samples of this notice (PDF)
Tax publications you may find useful
How to get help
- Call the 1-800 number listed on the top right corner of your notice.
- Authorize someone (e.g., accountant) to contact the IRS on your behalf using Form 2848.
- See if you qualify for help from a Low Income Taxpayer Clinic.
The 2009 1040ez
2009 1040ez 3. 2009 1040ez Gifts Table of Contents If you give gifts in the course of your trade or business, you can deduct all or part of the cost. 2009 1040ez This chapter explains the limits and rules for deducting the costs of gifts. 2009 1040ez $25 limit. 2009 1040ez You can deduct no more than $25 for business gifts you give directly or indirectly to each person during your tax year. 2009 1040ez A gift to a company that is intended for the eventual personal use or benefit of a particular person or a limited class of people will be considered an indirect gift to that particular person or to the individuals within that class of people who receive the gift. 2009 1040ez If you give a gift to a member of a customer's family, the gift is generally considered to be an indirect gift to the customer. 2009 1040ez This rule does not apply if you have a bona fide, independent business connection with that family member and the gift is not intended for the customer's eventual use. 2009 1040ez If you and your spouse both give gifts, both of you are treated as one taxpayer. 2009 1040ez It does not matter whether you have separate businesses, are separately employed, or whether each of you has an independent connection with the recipient. 2009 1040ez If a partnership gives gifts, the partnership and the partners are treated as one taxpayer. 2009 1040ez Example. 2009 1040ez Bob Jones sells products to Local Company. 2009 1040ez He and his wife, Jan, gave Local Company three gourmet gift baskets to thank them for their business. 2009 1040ez They paid $80 for each gift basket, or $240 total. 2009 1040ez Three of Local Company's executives took the gift baskets home for their families' use. 2009 1040ez Bob and Jan have no independent business relationship with any of the executives' other family members. 2009 1040ez They can deduct a total of $75 ($25 limit × 3) for the gift baskets. 2009 1040ez Incidental costs. 2009 1040ez Incidental costs, such as engraving on jewelry, or packaging, insuring, and mailing, are generally not included in determining the cost of a gift for purposes of the $25 limit. 2009 1040ez A cost is incidental only if it does not add substantial value to the gift. 2009 1040ez For example, the cost of gift wrapping is an incidental cost. 2009 1040ez However, the purchase of an ornamental basket for packaging fruit is not an incidental cost if the value of the basket is substantial compared to the value of the fruit. 2009 1040ez Exceptions. 2009 1040ez The following items are not considered gifts for purposes of the $25 limit. 2009 1040ez An item that costs $4 or less and: Has your name clearly and permanently imprinted on the gift, and Is one of a number of identical items you widely distribute. 2009 1040ez Examples include pens, desk sets, and plastic bags and cases. 2009 1040ez Signs, display racks, or other promotional material to be used on the business premises of the recipient. 2009 1040ez Figure B. 2009 1040ez When Are Transportation Expenses Deductible? Most employees and self-employed persons can use this chart. 2009 1040ez (Do not use this chart if your home is your principal place of business. 2009 1040ez See Office in the home . 2009 1040ez ) Please click here for the text description of the image. 2009 1040ez Figure B. 2009 1040ez When Are Local Transportation Expenses Deductible?TAs for Figure B are: Reg 1. 2009 1040ez 162-1(a); RR 55–109; RR 94–47 Gift or entertainment. 2009 1040ez Any item that might be considered either a gift or entertainment generally will be considered entertainment. 2009 1040ez However, if you give a customer packaged food or beverages you intend the customer to use at a later date, treat it as a gift. 2009 1040ez If you give a customer tickets to a theater performance or sporting event and you do not go with the customer to the performance or event, you have a choice. 2009 1040ez You can treat the cost of the tickets as either a gift expense or an entertainment expense, whichever is to your advantage. 2009 1040ez You can change your treatment of the tickets at a later date by filing an amended return. 2009 1040ez Generally, an amended return must be filed within 3 years from the date the original return was filed or within 2 years from the time the tax was paid, whichever is later. 2009 1040ez If you go with the customer to the event, you must treat the cost of the tickets as an entertainment expense. 2009 1040ez You cannot choose, in this case, to treat the cost of the tickets as a gift expense. 2009 1040ez Prev Up Next Home More Online Publications