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Author: Ken288 One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121175  
Subject: Non-Dividend Distribution Date: 3/3/2014 9:36 PM
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On my 1099-Div, I have Box 3 Non-Dividend Distributions. My broker says these are from 3 stocks - NVDA, KWG, FHCO. How do I confirm that these are indeed non-dividend distributions as opposed to regular dividends? I would hate to do my taxes and get a revised 1099-Div telling me these are regular dividends.

Thank you for your help.

Ken
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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 120342 of 121175
Subject: Re: Non-Dividend Distribution Date: 3/3/2014 10:37 PM
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On my 1099-Div, I have Box 3 Non-Dividend Distributions. My broker says these are from 3 stocks - NVDA, KWG, FHCO. How do I confirm that these are indeed non-dividend distributions as opposed to regular dividends? I would hate to do my taxes and get a revised 1099-Div telling me these are regular dividends.

Box 3 entries are usually returns of capital. These often occur if the company doesn't have enough earnings to support the cash distributed as dividends. When you receive a non-dividend distribution, you reduce your cost basis in the shares you own. It doesn't get reported on your current income tax return, but will increase the gain (reduce the loss) reported when you sell the shares in question.

The best resource for determining that these are not going to be reclassified is the investor relations site at the company.

Ira

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Author: Ken288 One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 120346 of 121175
Subject: Re: Non-Dividend Distribution Date: 3/4/2014 12:21 PM
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Thanks, Ira for the reply. Since I am talking about small amounts, is it possible to treat these as dividends and pay the tax now as opposed to keeping track of the cost basis?

Ken

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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 120348 of 121175
Subject: Re: Non-Dividend Distribution Date: 3/4/2014 2:38 PM
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Thanks, Ira for the reply. Since I am talking about small amounts, is it possible to treat these as dividends and pay the tax now as opposed to keeping track of the cost basis?

You can always pay more tax now. The IRS will love you (but they won't thank you). However, that doesn't mean you won't pay the tax again when you sell the shares. With cost basis tracking becoming the rule, your broker will be reporting the adjusted (lower) cost basis when you sell, so you'll just pay the tax twice.

Ira

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Author: Ken288 One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 120367 of 121175
Subject: Re: Non-Dividend Distribution Date: 3/5/2014 12:08 PM
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Ira:

It's not just when you sell that all this tracking concerns me. It's when the nondividend amounts exceed my cost basis, then the excess will need to be reported as capital gains. Is this requirement part of the new regulation that brokers must track for us?

Thank you.

Ken

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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 120370 of 121175
Subject: Re: Non-Dividend Distribution Date: 3/5/2014 1:10 PM
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It's not just when you sell that all this tracking concerns me. It's when the nondividend amounts exceed my cost basis, then the excess will need to be reported as capital gains. Is this requirement part of the new regulation that brokers must track for us?

While the broker may be tracking cost basis, I don't know if they will be responsible for letting you know if your cost basis reaches $0. Somehow, I doubt it, since there is no requirement for them to provide an annual report of the cost basis of open positions.

Ira

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