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Www freefillableforms com 8. Www freefillableforms com   Dividends and Other Distributions Table of Contents Reminder Introduction Useful Items - You may want to see: General InformationDividends not reported on Form 1099-DIV. Www freefillableforms com Reporting tax withheld. Www freefillableforms com Nominees. Www freefillableforms com Ordinary DividendsQualified Dividends Dividends Used to Buy More Stock Money Market Funds Capital Gain DistributionsBasis adjustment. Www freefillableforms com Nondividend DistributionsLiquidating Distributions Distributions of Stock and Stock Rights Other DistributionsInformation reporting requirement. Www freefillableforms com Alternative minimum tax treatment. Www freefillableforms com How To Report Dividend IncomeInvestment interest deducted. Www freefillableforms com Reminder Foreign-source income. Www freefillableforms com  If you are a U. Www freefillableforms com S. Www freefillableforms com 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. Www freefillableforms com S. Www freefillableforms com law. Www freefillableforms com 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. Www freefillableforms com 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. Www freefillableforms com This chapter also explains how to report dividend income on your tax return. Www freefillableforms com Dividends are distributions of money, stock, or other property paid to you by a corporation or by a mutual fund. Www freefillableforms com You also may receive dividends through a partnership, an estate, a trust, or an association that is taxed as a corporation. Www freefillableforms com However, some amounts you receive that are called dividends are actually interest income. Www freefillableforms com (See Dividends that are actually interest under Taxable Interest in chapter 7. Www freefillableforms com ) Most distributions are paid in cash (or check). Www freefillableforms com However, distributions can consist of more stock, stock rights, other property, or services. Www freefillableforms com 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. Www freefillableforms com Tax on unearned income of certain children. Www freefillableforms com   Part of a child's 2013 unearned income may be taxed at the parent's tax rate. Www freefillableforms com If it is, Form 8615, Tax for Certain Children Who Have Unearned Income, must be completed and attached to the child's tax return. Www freefillableforms com If not, Form 8615 is not required and the child's income is taxed at his or her own tax rate. Www freefillableforms com    Some parents can choose to include the child's interest and dividends on the parent's return if certain requirements are met. Www freefillableforms com Use Form 8814, Parents' Election To Report Child's Interest and Dividends, for this purpose. Www freefillableforms com   For more information about the tax on unearned income of children and the parents' election, see chapter 31. Www freefillableforms com Beneficiary of an estate or trust. Www freefillableforms com    Dividends and other distributions you receive as a beneficiary of an estate or trust are generally taxable income. Www freefillableforms com You should receive a Schedule K-1 (Form 1041), Beneficiary's Share of Income, Deductions, Credits, etc. Www freefillableforms com , from the fiduciary. Www freefillableforms com Your copy of Schedule K-1 (Form 1041) and its instructions will tell you where to report the income on your Form 1040. Www freefillableforms com Social security number (SSN) or individual taxpayer identification number (ITIN). Www freefillableforms com    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. Www freefillableforms com This includes payers of dividends. Www freefillableforms com If you do not give your SSN or ITIN to the payer of dividends, you may have to pay a penalty. Www freefillableforms com For more information on SSNs and ITINs, see Social Security Number (SSN) in chapter 1. Www freefillableforms com Backup withholding. Www freefillableforms com   Your dividend income is generally not subject to regular withholding. Www freefillableforms com However, it may be subject to backup withholding to ensure that income tax is collected on the income. Www freefillableforms com Under backup withholding, the payer of dividends must withhold, as income tax, on the amount you are paid, applying the appropriate withholding rate. Www freefillableforms com   Backup withholding may also be required if the IRS has determined that you underreported your interest or dividend income. Www freefillableforms com For more information, see Backup Withholding in chapter 4. Www freefillableforms com Stock certificate in two or more names. Www freefillableforms com   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. Www freefillableforms com Form 1099-DIV. Www freefillableforms com   Most corporations and mutual funds use Form 1099-DIV, Dividends and Distributions, to show you the distributions you received from them during the year. Www freefillableforms com Keep this form with your records. Www freefillableforms com You do not have to attach it to your tax return. Www freefillableforms com Dividends not reported on Form 1099-DIV. Www freefillableforms com   Even if you do not receive Form 1099-DIV, you must still report all your taxable dividend income. Www freefillableforms com For example, you may receive distributive shares of dividends from partnerships or S corporations. Www freefillableforms com These dividends are reported to you on Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. Www freefillableforms com , and Schedule K-1 (Form 1120S), Shareholder's Share of Income, Deductions, Credits, etc. Www freefillableforms com Reporting tax withheld. Www freefillableforms com   If tax is withheld from your dividend income, the payer must give you a Form 1099-DIV that indicates the amount withheld. Www freefillableforms com Nominees. Www freefillableforms com   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. Www freefillableforms com Form 1099-MISC. Www freefillableforms com   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. Www freefillableforms com See Reporting Substitute Payments under Short Sales in chapter 4 of Publication 550 for more information about reporting these payments. Www freefillableforms com Incorrect amount shown on a Form 1099. Www freefillableforms com   If you receive a Form 1099 that shows an incorrect amount (or other incorrect information), you should ask the issuer for a corrected form. Www freefillableforms com The new Form 1099 you receive will be marked “Corrected. Www freefillableforms com ” Dividends on stock sold. Www freefillableforms com   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. Www freefillableforms com Dividends received in January. Www freefillableforms com   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. Www freefillableforms com You report the dividend in the year it was declared. Www freefillableforms com Ordinary Dividends Ordinary (taxable) dividends are the most common type of distribution from a corporation or a mutual fund. Www freefillableforms com They are paid out of earnings and profits and are ordinary income to you. Www freefillableforms com This means they are not capital gains. Www freefillableforms com 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. Www freefillableforms com Ordinary dividends will be shown in box 1a of the Form 1099-DIV you receive. Www freefillableforms com 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. Www freefillableforms com They should be shown in box 1b of the Form 1099-DIV you receive. Www freefillableforms com The maximum rate of tax on qualified dividends is: 0% on any amount that otherwise would be taxed at a 10% or 15% rate. Www freefillableforms com 15% on any amount that otherwise would be taxed at rates greater than 15% but less than 39. Www freefillableforms com 6%. Www freefillableforms com 20% on any amount that otherwise would be taxed at a 39. Www freefillableforms com 6% rate. Www freefillableforms com To qualify for the maximum rate, all of the following requirements must be met. Www freefillableforms com The dividends must have been paid by a U. Www freefillableforms com S. Www freefillableforms com corporation or a qualified foreign corporation. Www freefillableforms com (See Qualified foreign corporation , later. Www freefillableforms com ) The dividends are not of the type listed later under Dividends that are not qualified dividends . Www freefillableforms com You meet the holding period (discussed next). Www freefillableforms com Holding period. Www freefillableforms com   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. Www freefillableforms com 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. Www freefillableforms com Instead, the seller will get the dividend. Www freefillableforms com   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. Www freefillableforms com See the examples later. Www freefillableforms com Exception for preferred stock. Www freefillableforms com   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. Www freefillableforms com If the preferred dividends are due to periods totaling less than 367 days, the holding period in the previous paragraph applies. Www freefillableforms com Example 1. Www freefillableforms com You bought 5,000 shares of XYZ Corp. Www freefillableforms com common stock on July 9, 2013. Www freefillableforms com XYZ Corp. Www freefillableforms com paid a cash dividend of 10 cents per share. Www freefillableforms com The ex-dividend date was July 16, 2013. Www freefillableforms com Your Form 1099-DIV from XYZ Corp. Www freefillableforms com shows $500 in box 1a (ordinary dividends) and in box 1b (qualified dividends). Www freefillableforms com However, you sold the 5,000 shares on August 12, 2013. Www freefillableforms com You held your shares of XYZ Corp. Www freefillableforms com for only 34 days of the 121-day period (from July 10, 2013, through August 12, 2013). Www freefillableforms com The 121-day period began on May 17, 2013 (60 days before the ex-dividend date), and ended on September 14, 2013. Www freefillableforms com You have no qualified dividends from XYZ Corp. Www freefillableforms com because you held the XYZ stock for less than 61 days. Www freefillableforms com Example 2. Www freefillableforms com 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. Www freefillableforms com You held the stock for 63 days (from July 16, 2013, through September 16, 2013). Www freefillableforms com 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). Www freefillableforms com Example 3. Www freefillableforms com You bought 10,000 shares of ABC Mutual Fund common stock on July 9, 2013. Www freefillableforms com ABC Mutual Fund paid a cash dividend of 10 cents a share. Www freefillableforms com The ex-dividend date was July 16, 2013. Www freefillableforms com The ABC Mutual Fund advises you that the portion of the dividend eligible to be treated as qualified dividends equals 2 cents per share. Www freefillableforms com Your Form 1099-DIV from ABC Mutual Fund shows total ordinary dividends of $1,000 and qualified dividends of $200. Www freefillableforms com However, you sold the 10,000 shares on August 12, 2013. Www freefillableforms com You have no qualified dividends from ABC Mutual Fund because you held the ABC Mutual Fund stock for less than 61 days. Www freefillableforms com Holding period reduced where risk of loss is diminished. Www freefillableforms com   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. Www freefillableforms com 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. Www freefillableforms com You were grantor (writer) of an option to buy substantially identical stock or securities. Www freefillableforms com Your risk of loss is diminished by holding one or more other positions in substantially similar or related property. Www freefillableforms com   For information about how to apply condition (3), see Regulations section 1. Www freefillableforms com 246-5. Www freefillableforms com Qualified foreign corporation. Www freefillableforms com   A foreign corporation is a qualified foreign corporation if it meets any of the following conditions. Www freefillableforms com The corporation is incorporated in a U. Www freefillableforms com S. Www freefillableforms com possession. Www freefillableforms com 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. Www freefillableforms com For a list of those treaties, see Table 8-1. Www freefillableforms com 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. Www freefillableforms com See Readily tradable stock , later. Www freefillableforms com Exception. Www freefillableforms com   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. Www freefillableforms com Readily tradable stock. Www freefillableforms com   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. Www freefillableforms com For a list of the exchanges that meet these requirements, see www. Www freefillableforms com sec. Www freefillableforms com gov/divisions/marketreg/mrexchanges. Www freefillableforms com shtml. Www freefillableforms com Dividends that are not qualified dividends. Www freefillableforms com   The following dividends are not qualified dividends. Www freefillableforms com They are not qualified dividends even if they are shown in box 1b of Form 1099-DIV. Www freefillableforms com Capital gain distributions. Www freefillableforms com Dividends paid on deposits with mutual savings banks, cooperative banks, credit unions, U. Www freefillableforms com S. Www freefillableforms com building and loan associations, U. Www freefillableforms com S. Www freefillableforms com savings and loan associations, federal savings and loan associations, and similar financial institutions. Www freefillableforms com (Report these amounts as interest income. Www freefillableforms com ) 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. Www freefillableforms com 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. Www freefillableforms com 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. Www freefillableforms com Payments in lieu of dividends, but only if you know or have reason to know the payments are not qualified dividends. Www freefillableforms com 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. Www freefillableforms com Table 8-1. Www freefillableforms com Income Tax Treaties Income tax treaties the United States has with the following countries satisfy requirement (2) under Qualified foreign corporation. Www freefillableforms com 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. Www freefillableforms com 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. Www freefillableforms com Most mutual funds also permit shareholders to automatically reinvest distributions in more shares in the fund, instead of receiving cash. Www freefillableforms com 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. Www freefillableforms com 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. Www freefillableforms com 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. Www freefillableforms com But you may be able to deduct the service charge. Www freefillableforms com See chapter 28 for more information about deducting expenses of producing income. Www freefillableforms com In some dividend reinvestment plans, you can invest more cash to buy shares of stock at a price less than fair market value. Www freefillableforms com 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. Www freefillableforms com When figuring this amount, use the fair market value of the stock on the dividend payment date. Www freefillableforms com Money Market Funds Report amounts you receive from money market funds as dividend income. Www freefillableforms com Money market funds are a type of mutual fund and should not be confused with bank money market accounts that pay interest. Www freefillableforms com 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). Www freefillableforms com They will be shown in box 2a of the Form 1099-DIV you receive from the mutual fund or REIT. Www freefillableforms com Report capital gain distributions as long-term capital gains, regardless of how long you owned your shares in the mutual fund or REIT. Www freefillableforms com Undistributed capital gains of mutual funds and REITs. Www freefillableforms com    Some mutual funds and REITs keep their long-term capital gains and pay tax on them. Www freefillableforms com You must treat your share of these gains as distributions, even though you did not actually receive them. Www freefillableforms com However, they are not included on Form 1099-DIV. Www freefillableforms com Instead, they are reported to you in box 1a of Form 2439. Www freefillableforms com   Report undistributed capital gains (box 1a of Form 2439) as long-term capital gains on Schedule D (Form 1040), column (h), line 11. Www freefillableforms com   The tax paid on these gains by the mutual fund or REIT is shown in box 2 of Form 2439. Www freefillableforms com You take credit for this tax by including it on Form 1040, line 71, and checking box a on that line. Www freefillableforms com Attach Copy B of Form 2439 to your return, and keep Copy C for your records. Www freefillableforms com Basis adjustment. Www freefillableforms com   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. Www freefillableforms com Additional information. Www freefillableforms com   For more information on the treatment of distributions from mutual funds, see Publication 550. Www freefillableforms com 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. Www freefillableforms com You should receive a Form 1099-DIV or other statement showing the nondividend distribution. Www freefillableforms com On Form 1099-DIV, a nondividend distribution will be shown in box 3. Www freefillableforms com If you do not receive such a statement, you report the distribution as an ordinary dividend. Www freefillableforms com Basis adjustment. Www freefillableforms com   A nondividend distribution reduces the basis of your stock. Www freefillableforms com It is not taxed until your basis in the stock is fully recovered. Www freefillableforms com This nontaxable portion is also called a return of capital; it is a return of your investment in the stock of the company. Www freefillableforms com 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. Www freefillableforms com   When the basis of your stock has been reduced to zero, report any additional nondividend distribution you receive as a capital gain. Www freefillableforms com Whether you report it as a long-term or short-term capital gain depends on how long you have held the stock. Www freefillableforms com See Holding Period in chapter 14. Www freefillableforms com Example. Www freefillableforms com You bought stock in 2000 for $100. Www freefillableforms com In 2003, you received a nondividend distribution of $80. Www freefillableforms com You did not include this amount in your income, but you reduced the basis of your stock to $20. Www freefillableforms com You received a nondividend distribution of $30 in 2013. Www freefillableforms com The first $20 of this amount reduced your basis to zero. Www freefillableforms com You report the other $10 as a long-term capital gain for 2013. Www freefillableforms com You must report as a long-term capital gain any nondividend distribution you receive on this stock in later years. Www freefillableforms com Liquidating Distributions Liquidating distributions, sometimes called liquidating dividends, are distributions you receive during a partial or complete liquidation of a corporation. Www freefillableforms com These distributions are, at least in part, one form of a return of capital. Www freefillableforms com They may be paid in one or more installments. Www freefillableforms com You will receive Form 1099-DIV from the corporation showing you the amount of the liquidating distribution in box 8 or 9. Www freefillableforms com For more information on liquidating distributions, see chapter 1 of Publication 550. Www freefillableforms com Distributions of Stock and Stock Rights Distributions by a corporation of its own stock are commonly known as stock dividends. Www freefillableforms com Stock rights (also known as “stock options”) are distributions by a corporation of rights to acquire the corporation's stock. Www freefillableforms com Generally, stock dividends and stock rights are not taxable to you, and you do not report them on your return. Www freefillableforms com Taxable stock dividends and stock rights. Www freefillableforms com   Distributions of stock dividends and stock rights are taxable to you if any of the following apply. Www freefillableforms com You or any other shareholder have the choice to receive cash or other property instead of stock or stock rights. Www freefillableforms com 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. Www freefillableforms com The distribution is in convertible preferred stock and has the same result as in (2). Www freefillableforms com The distribution gives preferred stock to some common stock shareholders and common stock to other common stock shareholders. Www freefillableforms com The distribution is on preferred stock. Www freefillableforms com (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. Www freefillableforms com )   The term “stock” includes rights to acquire stock, and the term “shareholder” includes a holder of rights or of convertible securities. Www freefillableforms com If you receive taxable stock dividends or stock rights, include their fair market value at the time of distribution in your income. Www freefillableforms com Preferred stock redeemable at a premium. Www freefillableforms com   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. Www freefillableforms com For more information, see chapter 1 of Publication 550. Www freefillableforms com Basis. Www freefillableforms com   Your basis in stock or stock rights received in a taxable distribution is their fair market value when distributed. Www freefillableforms com 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. Www freefillableforms com Fractional shares. Www freefillableforms com    You may not own enough stock in a corporation to receive a full share of stock if the corporation declares a stock dividend. Www freefillableforms com 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. Www freefillableforms com Any cash you receive for fractional shares under such a plan is treated as an amount realized on the sale of the fractional shares. Www freefillableforms com Report this transaction on Form 8949, Sales and Other Dispositions of Capital Assets. Www freefillableforms com 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. Www freefillableforms com    Report these transactions on Form 8949 with the correct box checked. Www freefillableforms com   For more information on Form 8949 and Schedule D (Form 1040), see chapter 4 of Publication 550. Www freefillableforms com Also see the Instructions for Form 8949 and the Instructions for Schedule D (Form 1040). Www freefillableforms com Example. Www freefillableforms com You own one share of common stock that you bought on January 3, 2004, for $100. Www freefillableforms com The corporation declared a common stock dividend of 5% on June 29, 2013. Www freefillableforms com The fair market value of the stock at the time the stock dividend was declared was $200. Www freefillableforms com You were paid $10 for the fractional-share stock dividend under a plan described in the discussion above. Www freefillableforms com You figure your gain or loss as follows: Fair market value of old stock $200. Www freefillableforms com 00 Fair market value of stock dividend (cash received) +10. Www freefillableforms com 00 Fair market value of old stock and stock dividend $210. Www freefillableforms com 00 Basis (cost) of old stock after the stock dividend (($200 ÷ $210) × $100) $95. Www freefillableforms com 24 Basis (cost) of stock dividend (($10 ÷ $210) × $100) + 4. Www freefillableforms com 76 Total $100. Www freefillableforms com 00 Cash received $10. Www freefillableforms com 00 Basis (cost) of stock dividend − 4. Www freefillableforms com 76 Gain $5. Www freefillableforms com 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. Www freefillableforms com Scrip dividends. Www freefillableforms com   A corporation that declares a stock dividend may issue you a scrip certificate that entitles you to a fractional share. Www freefillableforms com The certificate is generally nontaxable when you receive it. Www freefillableforms com 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. Www freefillableforms com   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. Www freefillableforms com You must include its fair market value in income on the date you receive it. Www freefillableforms com Other Distributions You may receive any of the following distributions during the year. Www freefillableforms com Exempt-interest dividends. Www freefillableforms com   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. Www freefillableforms com Exempt-interest dividends should be shown in box 10 of Form 1099-DIV. Www freefillableforms com Information reporting requirement. Www freefillableforms com   Although exempt-interest dividends are not taxable, you must show them on your tax return if you have to file a return. Www freefillableforms com This is an information reporting requirement and does not change the exempt-interest dividends to taxable income. Www freefillableforms com Alternative minimum tax treatment. Www freefillableforms com   Exempt-interest dividends paid from specified private activity bonds may be subject to the alternative minimum tax. Www freefillableforms com See Alternative Minimum Tax (AMT) in chapter 30 for more information. Www freefillableforms com Dividends on insurance policies. Www freefillableforms com    Insurance policy dividends the insurer keeps and uses to pay your premiums are not taxable. Www freefillableforms com However, you must report as taxable interest income the interest that is paid or credited on dividends left with the insurance company. Www freefillableforms com    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. Www freefillableforms com Do not include them in your gross income until they are more than the total of all net premiums you paid for the contract. Www freefillableforms com Report any taxable distributions on insurance policies on Form 1040, line 21. Www freefillableforms com Dividends on veterans' insurance. Www freefillableforms com   Dividends you receive on veterans' insurance policies are not taxable. Www freefillableforms com In addition, interest on dividends left with the Department of Veterans Affairs is not taxable. Www freefillableforms com Patronage dividends. Www freefillableforms com   Generally, patronage dividends you receive in money from a cooperative organization are included in your income. Www freefillableforms com   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. Www freefillableforms com But you must reduce the basis (cost) of the items bought. Www freefillableforms com If the dividend is more than the adjusted basis of the assets, you must report the excess as income. Www freefillableforms com   These rules are the same whether the cooperative paying the dividend is a taxable or tax-exempt cooperative. Www freefillableforms com Alaska Permanent Fund dividends. Www freefillableforms com    Do not report these amounts as dividends. Www freefillableforms com Instead, report these amounts on Form 1040, line 21; Form 1040A, line 13; or Form 1040EZ, line 3. Www freefillableforms com How To Report Dividend Income Generally, you can use either Form 1040 or Form 1040A to report your dividend income. Www freefillableforms com Report the total of your ordinary dividends on line 9a of Form 1040 or Form 1040A. Www freefillableforms com Report qualified dividends on line 9b of Form 1040 or Form 1040A. Www freefillableforms com If you receive capital gain distributions, you may be able to use Form 1040A or you may have to use Form 1040. Www freefillableforms com See Exceptions to filing Form 8949 and Schedule D (Form 1040) in chapter 16. Www freefillableforms com If you receive nondividend distributions required to be reported as capital gains, you must use Form 1040. Www freefillableforms com You cannot use Form 1040EZ if you receive any dividend income. Www freefillableforms com Form 1099-DIV. Www freefillableforms com   If you owned stock on which you received $10 or more in dividends and other distributions, you should receive a Form 1099-DIV. Www freefillableforms com Even if you do not receive Form 1099-DIV, you must report all your dividend income. Www freefillableforms com   See Form 1099-DIV for more information on how to report dividend income. Www freefillableforms com Form 1040A or 1040. Www freefillableforms com    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. Www freefillableforms com If your ordinary dividends are more than $1,500, you must also complete Schedule B (Form 1040A or 1040), Part III. Www freefillableforms com   List on Schedule B (Form 1040A or 1040), Part II, line 5, each payer's name and the ordinary dividends you received. Www freefillableforms com 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. Www freefillableforms com 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. Www freefillableforms com   Enter on line 6 the total of the amounts listed on line 5. Www freefillableforms com Also enter this total on line 9a of Form 1040A or 1040. Www freefillableforms com Qualified dividends. Www freefillableforms com   Report qualified dividends (Form 1099-DIV, box 1b) on line 9b of Form 1040 or Form 1040A. Www freefillableforms com The amount in box 1b is already included in box 1a. Www freefillableforms com Do not add the amount in box 1b to, or substract it from, the amount in box 1a. Www freefillableforms com   Do not include any of the following on line 9b. Www freefillableforms com Qualified dividends you received as a nominee. Www freefillableforms com See Nominees under How to Report Dividend Income in chapter 1 of Publication 550. Www freefillableforms com Dividends on stock for which you did not meet the holding period. Www freefillableforms com See Holding period , earlier under Qualified Dividends. Www freefillableforms com 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. Www freefillableforms com Payments in lieu of dividends, but only if you know or have reason to know the payments are not qualified dividends. Www freefillableforms com 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. Www freefillableforms com   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. Www freefillableforms com Enter qualified dividends on line 2 of the worksheet. Www freefillableforms com Investment interest deducted. Www freefillableforms com   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. Www freefillableforms com Reduce it by the qualified dividends you choose to include in investment income when figuring the limit on your investment interest deduction. Www freefillableforms com This is done on the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet. Www freefillableforms com For more information about the limit on investment interest, see Investment expenses in chapter 23. Www freefillableforms com Expenses related to dividend income. Www freefillableforms com   You may be able to deduct expenses related to dividend income if you itemize your deductions on Schedule A (Form 1040). Www freefillableforms com See chapter 28 for general information about deducting expenses of producing income. Www freefillableforms com More information. Www freefillableforms com    For more information about how to report dividend income, see chapter 1 of Publication 550 or the instructions for the form you must file. Www freefillableforms com Prev  Up  Next   Home   More Online Publications
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Www freefillableforms com 5. Www freefillableforms com   Table and Worksheets for the Self-Employed Table of Contents Community property laws. Www freefillableforms com As discussed in chapters 2 and 4, if you are self-employed, you must use the rate table or rate worksheet and deduction worksheet to figure your deduction for contributions you made for yourself to a SEP-IRA or qualified plan. Www freefillableforms com First, use either the rate table or rate worksheet to find your reduced contribution rate. Www freefillableforms com Then complete the deduction worksheet to figure your deduction for contributions. Www freefillableforms com The table and the worksheets in chapter 5 apply only to self-employed individuals who have only one defined contribution plan, such as a profit-sharing plan. Www freefillableforms com A SEP plan is treated as a profit-sharing plan. Www freefillableforms com However, do not use this worksheet for SARSEPs. Www freefillableforms com Rate table for self-employed. Www freefillableforms com   If your plan's contribution rate is a whole percentage (for example, 12% rather than 12½%), you can use the table on the next page to find your reduced contribution rate. Www freefillableforms com Otherwise, use the rate worksheet provided below. Www freefillableforms com   First, find your plan contribution rate (the contribution rate stated in your plan) in Column A of the table. Www freefillableforms com Then read across to the rate under Column B. Www freefillableforms com Enter the rate from Column B in step 4 of the Deduction Worksheet for Self-Employed on this page. Www freefillableforms com    Example. Www freefillableforms com You are a sole proprietor with no employees. Www freefillableforms com If your plan's contribution rate is 10% of a participant's compensation, your rate is 0. Www freefillableforms com 090909. Www freefillableforms com Enter this rate in step 4 of the Deduction Worksheet for Self-Employed on this page. Www freefillableforms com Deduction Worksheet for Self-Employed   Step 1           Enter your net profit from line 31, Schedule C (Form 1040); line 3, Schedule C-EZ (Form 1040); line 34, Schedule F (Form 1040)*; or box 14, code A**, Schedule K-1 (Form 1065)*. Www freefillableforms com For information on other income included in net profit from self-employment, see the Instructions for Schedule SE, Form 1040. Www freefillableforms com       *Reduce this amount by any amount reported on Schedule SE (Form 1040), line 1b. Www freefillableforms com       **General partners should reduce this amount by the same additional expenses subtracted from box 14, code A to determine the amount on line 1 or 2 of Schedule SE. Www freefillableforms com     Step 2           Enter your deduction for self-employment tax from Form 1040, line 27             Step 3           Net earnings from self-employment. Www freefillableforms com Subtract step 2 from step 1     Step 4           Enter your rate from the Rate Table for Self-Employed or Rate Worksheet for Self-Employed     Step 5           Multiply step 3 by step 4     Step 6           Multiply $255,000 by your plan contribution rate (not the reduced rate)     Step 7           Enter the smaller of step 5 or step 6     Step 8           Contribution dollar limit $51,000     • If you made any elective deferrals to your self-employed plan, go to step 9. Www freefillableforms com         • Otherwise, skip steps 9 through 20 and enter the smaller of step 7 or step 8 on step 21. Www freefillableforms com       Step 9           Enter your allowable elective deferrals (including designated Roth contributions) made to your self-employed plan during 2013. Www freefillableforms com Do not enter more than $17,500     Step 10           Subtract step 9 from step 8     Step 11           Subtract step 9 from step 3       Step 12           Enter one-half of step 11     Step 13           Enter the smallest of step 7, 10, or 12     Step 14           Subtract step 13 from step 3     Step 15           Enter the smaller of step 9 or step 14       • If you made catch-up contributions, go to step 16. Www freefillableforms com         • Otherwise, skip steps 16 through 18 and go to step 19. Www freefillableforms com       Step 16           Subtract step 15 from step 14     Step 17           Enter your catch-up contributions (including designated Roth contributions), if any. Www freefillableforms com Do not enter more than $5,500     Step 18           Enter the smaller of step 16 or step 17     Step 19           Add steps 13, 15, and 18. Www freefillableforms com     Step 20           Enter the amount of designated Roth contributions included on lines 9 and 17. Www freefillableforms com     Step 21           Subtract step 20 from step 19. Www freefillableforms com This is your maximum deductible contribution. Www freefillableforms com                 Next: Enter your actual contribution, not to exceed your maximum deductible contribution, on Form 1040, line 28. Www freefillableforms com   Rate worksheet for self-employed. Www freefillableforms com   If your plan's contribution rate is not a whole percentage (for example, 10½%), you cannot use the Rate Table for Self-Employed. Www freefillableforms com Use the following worksheet instead. Www freefillableforms com Rate Worksheet for Self-Employed 1) Plan contribution rate as a decimal (for example, 10½% = 0. Www freefillableforms com 105)   2) Rate in line 1 plus 1 (for example, 0. Www freefillableforms com 105 + 1 = 1. Www freefillableforms com 105)   3) Self-employed rate as a decimal rounded to at least 3 decimal places (line 1 ÷ line 2) (for example, 0. Www freefillableforms com 105 ÷ 1. Www freefillableforms com 105 = 0. Www freefillableforms com 095)   Figuring your deduction. Www freefillableforms com   Now that you have your self-employed rate from either the rate table or rate worksheet, you can figure your maximum deduction for contributions for yourself by completing the Deduction Worksheet for Self-Employed. Www freefillableforms com Community property laws. Www freefillableforms com   If you reside in a community property state and you are married and filing a separate return, disregard community property laws for step 1 of the Deduction Worksheet for Self-Employed. Www freefillableforms com Enter on step 1 the total net profit you actually earned. Www freefillableforms com Rate Table for Self-Employed Column A  If the plan contri- bution rate is: (shown as %) Column B  Your rate is: (shown as decimal) 1 . Www freefillableforms com 009901 2 . Www freefillableforms com 019608 3 . Www freefillableforms com 029126 4 . Www freefillableforms com 038462 5 . Www freefillableforms com 047619 6 . Www freefillableforms com 056604 7 . Www freefillableforms com 065421 8 . Www freefillableforms com 074074 9 . Www freefillableforms com 082569 10 . Www freefillableforms com 090909 11 . Www freefillableforms com 099099 12 . Www freefillableforms com 107143 13 . Www freefillableforms com 115044 14 . Www freefillableforms com 122807 15 . Www freefillableforms com 130435 16 . Www freefillableforms com 137931 17 . Www freefillableforms com 145299 18 . Www freefillableforms com 152542 19 . Www freefillableforms com 159664 20 . Www freefillableforms com 166667 21 . Www freefillableforms com 173554 22 . Www freefillableforms com 180328 23 . Www freefillableforms com 186992 24 . Www freefillableforms com 193548 25* . Www freefillableforms com 200000* *The deduction for annual employer contributions (other than elective deferrals) to a SEP plan, a profit-sharing plan, or a money purchase plan cannot be more than 20% of your net earnings (figured without deducting contributions for yourself) from the business that has the plan. Www freefillableforms com Example. Www freefillableforms com You are a sole proprietor with no employees. Www freefillableforms com The terms of your plan provide that you contribute 8½% (. Www freefillableforms com 085) of your compensation to your plan. Www freefillableforms com Your net profit from line 31, Schedule C (Form 1040) is $200,000. Www freefillableforms com You have no elective deferrals or catch-up contributions. Www freefillableforms com Your self-employment tax deduction on line 27 of Form 1040 is $9,728. Www freefillableforms com See the filled-in portions of both Schedule SE (Form 1040), Self-Employment Income, and Form 1040, later. Www freefillableforms com You figure your self-employed rate and maximum deduction for employer contributions you made for yourself as follows. Www freefillableforms com Deduction Worksheet for Self-Employed   Step 1           Enter your net profit from line 31, Schedule C (Form 1040); line 3, Schedule C-EZ (Form 1040); line 34, Schedule F (Form 1040)*; or box 14, code A**, Schedule K-1 (Form 1065)*. Www freefillableforms com For information on other income included in net profit from self-employment, see the Instructions for Schedule SE, Form 1040. Www freefillableforms com $200,000     *Reduce this amount by any amount reported on Schedule SE (Form 1040), line 1b. Www freefillableforms com       **General partners should reduce this amount by the same additional expenses subtracted from box 14, code A to determine the amount on line 1 or 2 of Schedule SE. Www freefillableforms com     Step 2           Enter your deduction for self-employment tax from Form 1040, line 27 9,728           Step 3           Net earnings from self-employment. Www freefillableforms com Subtract step 2 from step 1 190,272   Step 4           Enter your rate from the Rate Table for Self-Employed or Rate Worksheet for Self-Employed 0. Www freefillableforms com 078   Step 5           Multiply step 3 by step 4 14,841   Step 6           Multiply $255,000 by your plan contribution rate (not the reduced rate) 21,675   Step 7           Enter the smaller of step 5 or step 6 14,841   Step 8           Contribution dollar limit $51,000     • If you made any elective deferrals to your self-employed plan, go to step 9. Www freefillableforms com         • Otherwise, skip steps 9 through 20 and enter the smaller of step 7 or step 8 on step 21. Www freefillableforms com       Step 9           Enter your allowable elective deferrals (including designated Roth contributions) made to your self-employed plan during 2013. Www freefillableforms com Do not enter more than $17,500 N/A   Step 10           Subtract step 9 from step 8     Step 11           Subtract step 9 from step 3       Step 12           Enter one-half of step 11     Step 13           Enter the smallest of step 7, 10, or 12     Step 14           Subtract step 13 from step 3     Step 15           Enter the smaller of step 9 or step 14       • If you made catch-up contributions, go to step 16. Www freefillableforms com         • Otherwise, skip steps 16 through 18 and go to step 19. Www freefillableforms com       Step 16           Subtract step 15 from step 14     Step 17           Enter your catch-up contributions (including designated Roth contributions), if any. Www freefillableforms com Do not enter more than $5,500     Step 18           Enter the smaller of step 16 or step 17     Step 19           Add steps 13, 15, and 18. Www freefillableforms com     Step 20           Enter the amount of designated Roth contributions included on lines 9 and 17     Step 21           Subtract step 20 from step 19. Www freefillableforms com This is your maximum deductible contribution $14,841                 Next: Enter your actual contribution, not to exceed your maximum deductible contribution, on Form 1040, line 28. Www freefillableforms com   See the filled-in Deduction Worksheet for Self-Employed on this page. Www freefillableforms com Rate Worksheet for Self-Employed 1) Plan contribution rate as a decimal (for example, 10½% = 0. Www freefillableforms com 105) 0. Www freefillableforms com 085 2) Rate in line 1 plus 1 (for example, 0. Www freefillableforms com 105 + 1 = 1. Www freefillableforms com 105) 1. Www freefillableforms com 085 3) Self-employed rate as a decimal rounded to at least 3 decimal places (line 1 ÷ line 2) (for example, 0. Www freefillableforms com 105 ÷ 1. Www freefillableforms com 105 = 0. Www freefillableforms com 095) 0. Www freefillableforms com 078 This image is too large to be displayed in the current screen. Www freefillableforms com Please click the link to view the image. Www freefillableforms com Portion of Form 1040 and Portion of Schedule SE Prev  Up  Next   Home   More Online Publications