Robert and Janice Martin have the following four sources of
investment income to report on their 2000 tax return. Their Schedules
B and D (Form 1040) are shown later.
- $1,250 gain from the sale of 200 shares of Mutual Fund S on
October 6, 2000. They received Form 1099-B, and they report the
sale on Schedule D (Form 1040).
Robert and Janice purchased these shares in 1986 at $10 each. They
received some return of capital distributions in 1988, 1989, and 1997
that reduced their basis in the shares. In 1998 and 1999, the Martins
reported undistributed capital gains that increased their basis in
their shares. They received no distributions in 2000 before the sale.
- $265 in ordinary dividends and $61 in capital gain
distributions from Mutual Fund R. They received Form 1099-DIV.
They report the capital gain distributions on Schedule D (Form 1040)
because they have other capital transactions. They report the ordinary
dividends on Schedule B (Form 1040) because their total ordinary
dividends were over $400.
Robert and Janice invested $3,800 in this fund in June 2000 and
received 153.16 shares that cost $24.81 per share. They requested that
all of their distributions be reinvested in more shares of the fund.
On December 29, 2000, they acquired an additional 13.03 shares at
$25.01 per share from their reinvested dividends.
- $101 of exempt-interest dividends from Mutual Fund X. They
receive a statement from the fund, and they report this nontaxable
amount on line 8b of Form 1040.
The Martins invested $2,600 in this fund in April 1998 and received
87.54 shares at $29.70 per share. They received exempt-interest
dividends of $92 in 1998 and $107 in 1999.
- $237 in ordinary dividends from 100 shares of common stock
in Green Publishing Company. They received Form 1099-DIV, and
they report the dividends on Schedule B (Form 1040).
Robert and Janice bought this stock in 1986 for $10.29 per share.
Mutual Fund Record.
Robert and Janice keep track of all their basis adjustments on
their Mutual Fund Record, shown later. They show the return
of capital distributions and the undistributed capital gains from
Mutual Fund S and the reinvested dividends from Mutual Fund R. They do
not show the exempt-interest dividends from Mutual Fund X because
those dividends do not reduce their basis in the shares.
The Martins keep this record with their mutual fund documents, and
they use it to report their 2000 sale of Mutual Fund S.
Preparing the return.
The Martins first use their two Forms 1099-DIV to figure the
dividend income to report on Schedule B. They then use their Form
1099-B and their Mutual Fund Record to figure the
gain from the sale of Mutual Fund S to report on Schedule D.
Schedule B.
On line 5, Robert and Janice list the $265 ordinary dividends from
Mutual Fund R and the $237 ordinary dividends from Green Publishing
Company (from box 1 of Forms 1099-DIV). They enter the total of
$502 on line 6 and also on line 9 of Form 1040.
Schedule D.
Robert and Janice enter the $61 capital gain distribution from
Mutual Fund R (from box 2a of Form 1099-DIV) on line 13, column
(f). They do not make an entry in column (g) of line 13 because Mutual
Fund R did not indicate that any of the capital gain distribution was
a 28% rate gain distribution (box 2b of Form 1099-DIV).
They report the sale of their shares in Mutual Fund S on line 8
because they owned the shares for more than 1 year. They use the
information from their Mutual Fund Record to complete
columns (a), (b), and (e). After adjustment for their return of
capital distributions and their undistributed capital gains, their
basis is $1,996 ($9.98 per share). They use their Form 1099-B to
complete columns (c) and (d). Their sales price in column (d) (the
gross proceeds shown in box 2 of Form 1099-B) is $3,200 ($16 per
share). They enter their gain of $1,204 in column (f). They do not
make an entry in column (g) because the gain was not 28% rate gain.
Robert and Janice add the amounts on lines 8 and 13 and enter their
net long-term capital gain of $1,265 on line 16. They also enter that
amount on line 17. Because lines 16 and 17 are gains, they compute
their tax using Part IV of Schedule D. (Part IV is shown, but not
filled in.)
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