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Nm Taxation And Revenue Department

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Nm Taxation And Revenue Department

Nm taxation and revenue department 8. Nm taxation and revenue department   Dividends and Other Distributions Table of Contents Reminder Introduction Useful Items - You may want to see: General InformationDividends not reported on Form 1099-DIV. Nm taxation and revenue department Reporting tax withheld. Nm taxation and revenue department Nominees. Nm taxation and revenue department Ordinary DividendsQualified Dividends Dividends Used to Buy More Stock Money Market Funds Capital Gain DistributionsBasis adjustment. Nm taxation and revenue department Nondividend DistributionsLiquidating Distributions Distributions of Stock and Stock Rights Other DistributionsInformation reporting requirement. Nm taxation and revenue department Alternative minimum tax treatment. Nm taxation and revenue department How To Report Dividend IncomeInvestment interest deducted. Nm taxation and revenue department Reminder Foreign-source income. Nm taxation and revenue department  If you are a U. Nm taxation and revenue department S. Nm taxation and revenue department 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. Nm taxation and revenue department S. Nm taxation and revenue department law. Nm taxation and revenue department 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. Nm taxation and revenue department 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. Nm taxation and revenue department This chapter also explains how to report dividend income on your tax return. Nm taxation and revenue department Dividends are distributions of money, stock, or other property paid to you by a corporation or by a mutual fund. Nm taxation and revenue department You also may receive dividends through a partnership, an estate, a trust, or an association that is taxed as a corporation. Nm taxation and revenue department However, some amounts you receive that are called dividends are actually interest income. Nm taxation and revenue department (See Dividends that are actually interest under Taxable Interest in chapter 7. Nm taxation and revenue department ) Most distributions are paid in cash (or check). Nm taxation and revenue department However, distributions can consist of more stock, stock rights, other property, or services. Nm taxation and revenue department 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. Nm taxation and revenue department Tax on unearned income of certain children. Nm taxation and revenue department   Part of a child's 2013 unearned income may be taxed at the parent's tax rate. Nm taxation and revenue department If it is, Form 8615, Tax for Certain Children Who Have Unearned Income, must be completed and attached to the child's tax return. Nm taxation and revenue department If not, Form 8615 is not required and the child's income is taxed at his or her own tax rate. Nm taxation and revenue department    Some parents can choose to include the child's interest and dividends on the parent's return if certain requirements are met. Nm taxation and revenue department Use Form 8814, Parents' Election To Report Child's Interest and Dividends, for this purpose. Nm taxation and revenue department   For more information about the tax on unearned income of children and the parents' election, see chapter 31. Nm taxation and revenue department Beneficiary of an estate or trust. Nm taxation and revenue department    Dividends and other distributions you receive as a beneficiary of an estate or trust are generally taxable income. Nm taxation and revenue department You should receive a Schedule K-1 (Form 1041), Beneficiary's Share of Income, Deductions, Credits, etc. Nm taxation and revenue department , from the fiduciary. Nm taxation and revenue department Your copy of Schedule K-1 (Form 1041) and its instructions will tell you where to report the income on your Form 1040. Nm taxation and revenue department Social security number (SSN) or individual taxpayer identification number (ITIN). Nm taxation and revenue department    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. Nm taxation and revenue department This includes payers of dividends. Nm taxation and revenue department If you do not give your SSN or ITIN to the payer of dividends, you may have to pay a penalty. Nm taxation and revenue department For more information on SSNs and ITINs, see Social Security Number (SSN) in chapter 1. Nm taxation and revenue department Backup withholding. Nm taxation and revenue department   Your dividend income is generally not subject to regular withholding. Nm taxation and revenue department However, it may be subject to backup withholding to ensure that income tax is collected on the income. Nm taxation and revenue department Under backup withholding, the payer of dividends must withhold, as income tax, on the amount you are paid, applying the appropriate withholding rate. Nm taxation and revenue department   Backup withholding may also be required if the IRS has determined that you underreported your interest or dividend income. Nm taxation and revenue department For more information, see Backup Withholding in chapter 4. Nm taxation and revenue department Stock certificate in two or more names. Nm taxation and revenue department   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. Nm taxation and revenue department Form 1099-DIV. Nm taxation and revenue department   Most corporations and mutual funds use Form 1099-DIV, Dividends and Distributions, to show you the distributions you received from them during the year. Nm taxation and revenue department Keep this form with your records. Nm taxation and revenue department You do not have to attach it to your tax return. Nm taxation and revenue department Dividends not reported on Form 1099-DIV. Nm taxation and revenue department   Even if you do not receive Form 1099-DIV, you must still report all your taxable dividend income. Nm taxation and revenue department For example, you may receive distributive shares of dividends from partnerships or S corporations. Nm taxation and revenue department These dividends are reported to you on Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. Nm taxation and revenue department , and Schedule K-1 (Form 1120S), Shareholder's Share of Income, Deductions, Credits, etc. Nm taxation and revenue department Reporting tax withheld. Nm taxation and revenue department   If tax is withheld from your dividend income, the payer must give you a Form 1099-DIV that indicates the amount withheld. Nm taxation and revenue department Nominees. Nm taxation and revenue department   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. Nm taxation and revenue department Form 1099-MISC. Nm taxation and revenue department   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. Nm taxation and revenue department See Reporting Substitute Payments under Short Sales in chapter 4 of Publication 550 for more information about reporting these payments. Nm taxation and revenue department Incorrect amount shown on a Form 1099. Nm taxation and revenue department   If you receive a Form 1099 that shows an incorrect amount (or other incorrect information), you should ask the issuer for a corrected form. Nm taxation and revenue department The new Form 1099 you receive will be marked “Corrected. Nm taxation and revenue department ” Dividends on stock sold. Nm taxation and revenue department   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. Nm taxation and revenue department Dividends received in January. Nm taxation and revenue department   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. Nm taxation and revenue department You report the dividend in the year it was declared. Nm taxation and revenue department Ordinary Dividends Ordinary (taxable) dividends are the most common type of distribution from a corporation or a mutual fund. Nm taxation and revenue department They are paid out of earnings and profits and are ordinary income to you. Nm taxation and revenue department This means they are not capital gains. Nm taxation and revenue department 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. Nm taxation and revenue department Ordinary dividends will be shown in box 1a of the Form 1099-DIV you receive. Nm taxation and revenue department 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. Nm taxation and revenue department They should be shown in box 1b of the Form 1099-DIV you receive. Nm taxation and revenue department The maximum rate of tax on qualified dividends is: 0% on any amount that otherwise would be taxed at a 10% or 15% rate. Nm taxation and revenue department 15% on any amount that otherwise would be taxed at rates greater than 15% but less than 39. Nm taxation and revenue department 6%. Nm taxation and revenue department 20% on any amount that otherwise would be taxed at a 39. Nm taxation and revenue department 6% rate. Nm taxation and revenue department To qualify for the maximum rate, all of the following requirements must be met. Nm taxation and revenue department The dividends must have been paid by a U. Nm taxation and revenue department S. Nm taxation and revenue department corporation or a qualified foreign corporation. Nm taxation and revenue department (See Qualified foreign corporation , later. Nm taxation and revenue department ) The dividends are not of the type listed later under Dividends that are not qualified dividends . Nm taxation and revenue department You meet the holding period (discussed next). Nm taxation and revenue department Holding period. Nm taxation and revenue department   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. Nm taxation and revenue department 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. Nm taxation and revenue department Instead, the seller will get the dividend. Nm taxation and revenue department   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. Nm taxation and revenue department See the examples later. Nm taxation and revenue department Exception for preferred stock. Nm taxation and revenue department   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. Nm taxation and revenue department If the preferred dividends are due to periods totaling less than 367 days, the holding period in the previous paragraph applies. Nm taxation and revenue department Example 1. Nm taxation and revenue department You bought 5,000 shares of XYZ Corp. Nm taxation and revenue department common stock on July 9, 2013. Nm taxation and revenue department XYZ Corp. Nm taxation and revenue department paid a cash dividend of 10 cents per share. Nm taxation and revenue department The ex-dividend date was July 16, 2013. Nm taxation and revenue department Your Form 1099-DIV from XYZ Corp. Nm taxation and revenue department shows $500 in box 1a (ordinary dividends) and in box 1b (qualified dividends). Nm taxation and revenue department However, you sold the 5,000 shares on August 12, 2013. Nm taxation and revenue department You held your shares of XYZ Corp. Nm taxation and revenue department for only 34 days of the 121-day period (from July 10, 2013, through August 12, 2013). Nm taxation and revenue department The 121-day period began on May 17, 2013 (60 days before the ex-dividend date), and ended on September 14, 2013. Nm taxation and revenue department You have no qualified dividends from XYZ Corp. Nm taxation and revenue department because you held the XYZ stock for less than 61 days. Nm taxation and revenue department Example 2. Nm taxation and revenue department 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. Nm taxation and revenue department You held the stock for 63 days (from July 16, 2013, through September 16, 2013). Nm taxation and revenue department 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). Nm taxation and revenue department Example 3. Nm taxation and revenue department You bought 10,000 shares of ABC Mutual Fund common stock on July 9, 2013. Nm taxation and revenue department ABC Mutual Fund paid a cash dividend of 10 cents a share. Nm taxation and revenue department The ex-dividend date was July 16, 2013. Nm taxation and revenue department The ABC Mutual Fund advises you that the portion of the dividend eligible to be treated as qualified dividends equals 2 cents per share. Nm taxation and revenue department Your Form 1099-DIV from ABC Mutual Fund shows total ordinary dividends of $1,000 and qualified dividends of $200. Nm taxation and revenue department However, you sold the 10,000 shares on August 12, 2013. Nm taxation and revenue department You have no qualified dividends from ABC Mutual Fund because you held the ABC Mutual Fund stock for less than 61 days. Nm taxation and revenue department Holding period reduced where risk of loss is diminished. Nm taxation and revenue department   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. Nm taxation and revenue department 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. Nm taxation and revenue department You were grantor (writer) of an option to buy substantially identical stock or securities. Nm taxation and revenue department Your risk of loss is diminished by holding one or more other positions in substantially similar or related property. Nm taxation and revenue department   For information about how to apply condition (3), see Regulations section 1. Nm taxation and revenue department 246-5. Nm taxation and revenue department Qualified foreign corporation. Nm taxation and revenue department   A foreign corporation is a qualified foreign corporation if it meets any of the following conditions. Nm taxation and revenue department The corporation is incorporated in a U. Nm taxation and revenue department S. Nm taxation and revenue department possession. Nm taxation and revenue department 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. Nm taxation and revenue department For a list of those treaties, see Table 8-1. Nm taxation and revenue department 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. Nm taxation and revenue department See Readily tradable stock , later. Nm taxation and revenue department Exception. Nm taxation and revenue department   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. Nm taxation and revenue department Readily tradable stock. Nm taxation and revenue department   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. Nm taxation and revenue department For a list of the exchanges that meet these requirements, see www. Nm taxation and revenue department sec. Nm taxation and revenue department gov/divisions/marketreg/mrexchanges. Nm taxation and revenue department shtml. Nm taxation and revenue department Dividends that are not qualified dividends. Nm taxation and revenue department   The following dividends are not qualified dividends. Nm taxation and revenue department They are not qualified dividends even if they are shown in box 1b of Form 1099-DIV. Nm taxation and revenue department Capital gain distributions. Nm taxation and revenue department Dividends paid on deposits with mutual savings banks, cooperative banks, credit unions, U. Nm taxation and revenue department S. Nm taxation and revenue department building and loan associations, U. Nm taxation and revenue department S. Nm taxation and revenue department savings and loan associations, federal savings and loan associations, and similar financial institutions. Nm taxation and revenue department (Report these amounts as interest income. Nm taxation and revenue department ) 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. Nm taxation and revenue department 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. Nm taxation and revenue department 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. Nm taxation and revenue department Payments in lieu of dividends, but only if you know or have reason to know the payments are not qualified dividends. Nm taxation and revenue department 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. Nm taxation and revenue department Table 8-1. Nm taxation and revenue department Income Tax Treaties Income tax treaties the United States has with the following countries satisfy requirement (2) under Qualified foreign corporation. Nm taxation and revenue department 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. Nm taxation and revenue department 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. Nm taxation and revenue department Most mutual funds also permit shareholders to automatically reinvest distributions in more shares in the fund, instead of receiving cash. Nm taxation and revenue department 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. Nm taxation and revenue department 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. Nm taxation and revenue department 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. Nm taxation and revenue department But you may be able to deduct the service charge. Nm taxation and revenue department See chapter 28 for more information about deducting expenses of producing income. Nm taxation and revenue department In some dividend reinvestment plans, you can invest more cash to buy shares of stock at a price less than fair market value. Nm taxation and revenue department 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. Nm taxation and revenue department When figuring this amount, use the fair market value of the stock on the dividend payment date. Nm taxation and revenue department Money Market Funds Report amounts you receive from money market funds as dividend income. Nm taxation and revenue department Money market funds are a type of mutual fund and should not be confused with bank money market accounts that pay interest. Nm taxation and revenue department 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). Nm taxation and revenue department They will be shown in box 2a of the Form 1099-DIV you receive from the mutual fund or REIT. Nm taxation and revenue department Report capital gain distributions as long-term capital gains, regardless of how long you owned your shares in the mutual fund or REIT. Nm taxation and revenue department Undistributed capital gains of mutual funds and REITs. Nm taxation and revenue department    Some mutual funds and REITs keep their long-term capital gains and pay tax on them. Nm taxation and revenue department You must treat your share of these gains as distributions, even though you did not actually receive them. Nm taxation and revenue department However, they are not included on Form 1099-DIV. Nm taxation and revenue department Instead, they are reported to you in box 1a of Form 2439. Nm taxation and revenue department   Report undistributed capital gains (box 1a of Form 2439) as long-term capital gains on Schedule D (Form 1040), column (h), line 11. Nm taxation and revenue department   The tax paid on these gains by the mutual fund or REIT is shown in box 2 of Form 2439. Nm taxation and revenue department You take credit for this tax by including it on Form 1040, line 71, and checking box a on that line. Nm taxation and revenue department Attach Copy B of Form 2439 to your return, and keep Copy C for your records. Nm taxation and revenue department Basis adjustment. Nm taxation and revenue department   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. Nm taxation and revenue department Additional information. Nm taxation and revenue department   For more information on the treatment of distributions from mutual funds, see Publication 550. Nm taxation and revenue department 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. Nm taxation and revenue department You should receive a Form 1099-DIV or other statement showing the nondividend distribution. Nm taxation and revenue department On Form 1099-DIV, a nondividend distribution will be shown in box 3. Nm taxation and revenue department If you do not receive such a statement, you report the distribution as an ordinary dividend. Nm taxation and revenue department Basis adjustment. Nm taxation and revenue department   A nondividend distribution reduces the basis of your stock. Nm taxation and revenue department It is not taxed until your basis in the stock is fully recovered. Nm taxation and revenue department This nontaxable portion is also called a return of capital; it is a return of your investment in the stock of the company. Nm taxation and revenue department 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. Nm taxation and revenue department   When the basis of your stock has been reduced to zero, report any additional nondividend distribution you receive as a capital gain. Nm taxation and revenue department Whether you report it as a long-term or short-term capital gain depends on how long you have held the stock. Nm taxation and revenue department See Holding Period in chapter 14. Nm taxation and revenue department Example. Nm taxation and revenue department You bought stock in 2000 for $100. Nm taxation and revenue department In 2003, you received a nondividend distribution of $80. Nm taxation and revenue department You did not include this amount in your income, but you reduced the basis of your stock to $20. Nm taxation and revenue department You received a nondividend distribution of $30 in 2013. Nm taxation and revenue department The first $20 of this amount reduced your basis to zero. Nm taxation and revenue department You report the other $10 as a long-term capital gain for 2013. Nm taxation and revenue department You must report as a long-term capital gain any nondividend distribution you receive on this stock in later years. Nm taxation and revenue department Liquidating Distributions Liquidating distributions, sometimes called liquidating dividends, are distributions you receive during a partial or complete liquidation of a corporation. Nm taxation and revenue department These distributions are, at least in part, one form of a return of capital. Nm taxation and revenue department They may be paid in one or more installments. Nm taxation and revenue department You will receive Form 1099-DIV from the corporation showing you the amount of the liquidating distribution in box 8 or 9. Nm taxation and revenue department For more information on liquidating distributions, see chapter 1 of Publication 550. Nm taxation and revenue department Distributions of Stock and Stock Rights Distributions by a corporation of its own stock are commonly known as stock dividends. Nm taxation and revenue department Stock rights (also known as “stock options”) are distributions by a corporation of rights to acquire the corporation's stock. Nm taxation and revenue department Generally, stock dividends and stock rights are not taxable to you, and you do not report them on your return. Nm taxation and revenue department Taxable stock dividends and stock rights. Nm taxation and revenue department   Distributions of stock dividends and stock rights are taxable to you if any of the following apply. Nm taxation and revenue department You or any other shareholder have the choice to receive cash or other property instead of stock or stock rights. Nm taxation and revenue department 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. Nm taxation and revenue department The distribution is in convertible preferred stock and has the same result as in (2). Nm taxation and revenue department The distribution gives preferred stock to some common stock shareholders and common stock to other common stock shareholders. Nm taxation and revenue department The distribution is on preferred stock. Nm taxation and revenue department (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. Nm taxation and revenue department )   The term “stock” includes rights to acquire stock, and the term “shareholder” includes a holder of rights or of convertible securities. Nm taxation and revenue department If you receive taxable stock dividends or stock rights, include their fair market value at the time of distribution in your income. Nm taxation and revenue department Preferred stock redeemable at a premium. Nm taxation and revenue department   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. Nm taxation and revenue department For more information, see chapter 1 of Publication 550. Nm taxation and revenue department Basis. Nm taxation and revenue department   Your basis in stock or stock rights received in a taxable distribution is their fair market value when distributed. Nm taxation and revenue department 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. Nm taxation and revenue department Fractional shares. Nm taxation and revenue department    You may not own enough stock in a corporation to receive a full share of stock if the corporation declares a stock dividend. Nm taxation and revenue department 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. Nm taxation and revenue department Any cash you receive for fractional shares under such a plan is treated as an amount realized on the sale of the fractional shares. Nm taxation and revenue department Report this transaction on Form 8949, Sales and Other Dispositions of Capital Assets. Nm taxation and revenue department 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. Nm taxation and revenue department    Report these transactions on Form 8949 with the correct box checked. Nm taxation and revenue department   For more information on Form 8949 and Schedule D (Form 1040), see chapter 4 of Publication 550. Nm taxation and revenue department Also see the Instructions for Form 8949 and the Instructions for Schedule D (Form 1040). Nm taxation and revenue department Example. Nm taxation and revenue department You own one share of common stock that you bought on January 3, 2004, for $100. Nm taxation and revenue department The corporation declared a common stock dividend of 5% on June 29, 2013. Nm taxation and revenue department The fair market value of the stock at the time the stock dividend was declared was $200. Nm taxation and revenue department You were paid $10 for the fractional-share stock dividend under a plan described in the discussion above. Nm taxation and revenue department You figure your gain or loss as follows: Fair market value of old stock $200. Nm taxation and revenue department 00 Fair market value of stock dividend (cash received) +10. Nm taxation and revenue department 00 Fair market value of old stock and stock dividend $210. Nm taxation and revenue department 00 Basis (cost) of old stock after the stock dividend (($200 ÷ $210) × $100) $95. Nm taxation and revenue department 24 Basis (cost) of stock dividend (($10 ÷ $210) × $100) + 4. Nm taxation and revenue department 76 Total $100. Nm taxation and revenue department 00 Cash received $10. Nm taxation and revenue department 00 Basis (cost) of stock dividend − 4. Nm taxation and revenue department 76 Gain $5. Nm taxation and revenue department 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. Nm taxation and revenue department Scrip dividends. Nm taxation and revenue department   A corporation that declares a stock dividend may issue you a scrip certificate that entitles you to a fractional share. Nm taxation and revenue department The certificate is generally nontaxable when you receive it. Nm taxation and revenue department 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. Nm taxation and revenue department   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. Nm taxation and revenue department You must include its fair market value in income on the date you receive it. Nm taxation and revenue department Other Distributions You may receive any of the following distributions during the year. Nm taxation and revenue department Exempt-interest dividends. Nm taxation and revenue department   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. Nm taxation and revenue department Exempt-interest dividends should be shown in box 10 of Form 1099-DIV. Nm taxation and revenue department Information reporting requirement. Nm taxation and revenue department   Although exempt-interest dividends are not taxable, you must show them on your tax return if you have to file a return. Nm taxation and revenue department This is an information reporting requirement and does not change the exempt-interest dividends to taxable income. Nm taxation and revenue department Alternative minimum tax treatment. Nm taxation and revenue department   Exempt-interest dividends paid from specified private activity bonds may be subject to the alternative minimum tax. Nm taxation and revenue department See Alternative Minimum Tax (AMT) in chapter 30 for more information. Nm taxation and revenue department Dividends on insurance policies. Nm taxation and revenue department    Insurance policy dividends the insurer keeps and uses to pay your premiums are not taxable. Nm taxation and revenue department However, you must report as taxable interest income the interest that is paid or credited on dividends left with the insurance company. Nm taxation and revenue department    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. Nm taxation and revenue department Do not include them in your gross income until they are more than the total of all net premiums you paid for the contract. Nm taxation and revenue department Report any taxable distributions on insurance policies on Form 1040, line 21. Nm taxation and revenue department Dividends on veterans' insurance. Nm taxation and revenue department   Dividends you receive on veterans' insurance policies are not taxable. Nm taxation and revenue department In addition, interest on dividends left with the Department of Veterans Affairs is not taxable. Nm taxation and revenue department Patronage dividends. Nm taxation and revenue department   Generally, patronage dividends you receive in money from a cooperative organization are included in your income. Nm taxation and revenue department   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. Nm taxation and revenue department But you must reduce the basis (cost) of the items bought. Nm taxation and revenue department If the dividend is more than the adjusted basis of the assets, you must report the excess as income. Nm taxation and revenue department   These rules are the same whether the cooperative paying the dividend is a taxable or tax-exempt cooperative. Nm taxation and revenue department Alaska Permanent Fund dividends. Nm taxation and revenue department    Do not report these amounts as dividends. Nm taxation and revenue department Instead, report these amounts on Form 1040, line 21; Form 1040A, line 13; or Form 1040EZ, line 3. Nm taxation and revenue department How To Report Dividend Income Generally, you can use either Form 1040 or Form 1040A to report your dividend income. Nm taxation and revenue department Report the total of your ordinary dividends on line 9a of Form 1040 or Form 1040A. Nm taxation and revenue department Report qualified dividends on line 9b of Form 1040 or Form 1040A. Nm taxation and revenue department If you receive capital gain distributions, you may be able to use Form 1040A or you may have to use Form 1040. Nm taxation and revenue department See Exceptions to filing Form 8949 and Schedule D (Form 1040) in chapter 16. Nm taxation and revenue department If you receive nondividend distributions required to be reported as capital gains, you must use Form 1040. Nm taxation and revenue department You cannot use Form 1040EZ if you receive any dividend income. Nm taxation and revenue department Form 1099-DIV. Nm taxation and revenue department   If you owned stock on which you received $10 or more in dividends and other distributions, you should receive a Form 1099-DIV. Nm taxation and revenue department Even if you do not receive Form 1099-DIV, you must report all your dividend income. Nm taxation and revenue department   See Form 1099-DIV for more information on how to report dividend income. Nm taxation and revenue department Form 1040A or 1040. Nm taxation and revenue department    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. Nm taxation and revenue department If your ordinary dividends are more than $1,500, you must also complete Schedule B (Form 1040A or 1040), Part III. Nm taxation and revenue department   List on Schedule B (Form 1040A or 1040), Part II, line 5, each payer's name and the ordinary dividends you received. Nm taxation and revenue department 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. Nm taxation and revenue department 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. Nm taxation and revenue department   Enter on line 6 the total of the amounts listed on line 5. Nm taxation and revenue department Also enter this total on line 9a of Form 1040A or 1040. Nm taxation and revenue department Qualified dividends. Nm taxation and revenue department   Report qualified dividends (Form 1099-DIV, box 1b) on line 9b of Form 1040 or Form 1040A. Nm taxation and revenue department The amount in box 1b is already included in box 1a. Nm taxation and revenue department Do not add the amount in box 1b to, or substract it from, the amount in box 1a. Nm taxation and revenue department   Do not include any of the following on line 9b. Nm taxation and revenue department Qualified dividends you received as a nominee. Nm taxation and revenue department See Nominees under How to Report Dividend Income in chapter 1 of Publication 550. Nm taxation and revenue department Dividends on stock for which you did not meet the holding period. Nm taxation and revenue department See Holding period , earlier under Qualified Dividends. Nm taxation and revenue department 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. Nm taxation and revenue department Payments in lieu of dividends, but only if you know or have reason to know the payments are not qualified dividends. Nm taxation and revenue department 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. Nm taxation and revenue department   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. Nm taxation and revenue department Enter qualified dividends on line 2 of the worksheet. Nm taxation and revenue department Investment interest deducted. Nm taxation and revenue department   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. Nm taxation and revenue department Reduce it by the qualified dividends you choose to include in investment income when figuring the limit on your investment interest deduction. Nm taxation and revenue department This is done on the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet. Nm taxation and revenue department For more information about the limit on investment interest, see Investment expenses in chapter 23. Nm taxation and revenue department Expenses related to dividend income. Nm taxation and revenue department   You may be able to deduct expenses related to dividend income if you itemize your deductions on Schedule A (Form 1040). Nm taxation and revenue department See chapter 28 for general information about deducting expenses of producing income. Nm taxation and revenue department More information. Nm taxation and revenue department    For more information about how to report dividend income, see chapter 1 of Publication 550 or the instructions for the form you must file. Nm taxation and revenue department Prev  Up  Next   Home   More Online Publications
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Nm taxation and revenue department Publication 525 - Additional Material Prev  Up  Next   Home   More Online Publications