World of Shareware - Software Farm 2/wosw_2.zip/wosw_2/BUDGET/TTOOL92.ZIP/CHAPT9.DOC

Text File | 1992-12-13 | 37.1 KB | 694 lines

Chapter 9. Dividends and Other Corporate Distributions

Important Reminder

Dividends received in January. Any dividend declared by a regulated investment
company (mutual fund) or real estate investment trust (REIT) in October,
November, or December and payable to you in such a month, but actually paid
during January of the following calendar year, is treated as paid to you in
the earlier year.

Introduction

This chapter discusses the tax treatment of:

∙  Dividend income,

∙  Capital gain distributions,

∙  Nontaxable distributions, and

∙  Other distributions you may receive from a corporation or a mutual fund.

This chapter also explains how to report dividend income on your tax return.

Dividends are distributions of money, stock, or other property paid to you
by a corporation. You also may receive dividends through a partnership, an
estate, a trust, or an association that is taxed as a corporation. However,
some amounts you receive that are called dividends are actually interest
income. See Dividends that are actually interest under Taxable Interest
in Chapter 8.

Most distributions that you receive are paid in cash (or check). However,
you may receive distributions such as additional stock, stock rights, other
property, or services. These distributions are also discussed in this chapter.

Related publications and forms.

This chapter refers to several publications and forms that you may need.
The list of forms does not include Forms 1040, 1040A, and 1040EZ. For more
information, you may want to order any of the following:

     Publication 514, Foreign Tax Credit for Individuals

     Publication 525, Taxable and Nontaxable Income

     Publication 550, Investment Income and Expenses

     Publication 564, Mutual Fund Distributions

     Publication 925, Passive Activity and At-Risk Rules

     Schedule B (Form 1040), Interest and Dividend Income

     Schedule 1 (Form 1040A), Interest and Dividend Income for Form 1040A
     Filers

     1992 Instructions for Forms 1099, 1098, 5498, and W─2G

     Form 1116, Foreign Tax Credit

General Information

This section discusses general rules on dividend income.

Passive activity income and losses. There are tax rules which limit the
amount of losses and tax credits from passive activities that you can claim.
Generally, only income from passive activities can be used to offset losses
from passive activities. Consequently, you generally cannot use passive
activity losses to offset your other income, such as your wages or your
portfolio income. Portfolio income is any gross income from interest,
dividends, etc., that is not derived in the ordinary course of a trade or
business. For more information about determining and reporting income and
losses from passive activities, see Publication 925, Passive Activity and
At-Risk Rules.

Tax on investment income of a child under age 14. If a child is under age 14
at the end of the year and has more than $1,200 of investment income (such
as taxable interest and dividends), part of his or her investment income may
be taxed at the parents' tax rate if either parent is alive at the end of the
year. If these requirements are met, Form 8615, Tax for Children Under Age 14
Who Have Investment Income of More Than $1,200, must be completed and attached
to the child's tax return. If these requirements are not met, Form 8615 is not
required and the child's income is taxed at his or her own tax rate.

However, parents can choose to include their child's gross income on their
return if certain requirements are met. Form 8814, Parent's Election To
Report Child's Interest and Dividends, is used for this purpose.

For more information about the tax on investment income of children and
the parent's election, see Chapter 32.

Beneficiary of an estate or trust. Interest, dividends, or other investment
income you receive as a beneficiary of an estate or trust is generally taxable
income. You should receive a Schedule K─1 (Form 1041), Beneficiary's Share
of Income, Deductions, Credits, etc. - 1992, from the fiduciary. Your copy of
Schedule K─1 and its instructions will tell you where to report the items from
Schedule K─1 on your Form 1040.

Backup withholding. To ensure that income tax is collected on dividends and
other types of income that generally are not subject to withholding, backup
withholding will apply in certain circumstances.

Under backup withholding, when you open a new account you must certify under
penalties of perjury that your social security number is correct and that you
are not subject to backup withholding. If you fail to make this certification,
backup withholding may begin immediately on your new account or investment and
20% of the amount paid on your account or investment will be withheld. Your
payer will give you a Form W─9, Request for Taxpayer Identification Number
and Certification, or a similar form, to make this certification. Backup
withholding may also be required if the Internal Revenue Service (IRS) has
determined that you underreported your interest and/or dividend income. For
more information, see Backup Withholding in Chapter 5.

Form 1099─DIV. Most corporations use Form 1099─DIV, Dividends and
Distributions, to show you the distributions you received from them during
the year. Keep this form with your records. You do not have to attach it
to your tax return. Even if you do not receive Form 1099─DIV, you must
report all of your taxable dividend income.

Reporting tax withheld. If tax is withheld from your dividend income, the
payer must give you a Form 1099─DIV that indicates the amount withheld.

Nominees. If someone receives distributions as a nominee for you, that person
will give you a Form 1099─DIV, which will show distributions they received on
your behalf.

If you receive a Form 1099─DIV that includes amounts belonging to another
person, see Nominees, later under How to Report Dividend Income, for more
information.

Form 1099─MISC. Certain substitute payments in lieu of dividends or tax-exempt
interest that are received by a broker on your behalf must be reported to you
on Form 1099─MISC, Miscellaneous Income, or a similar statement. See Reporting
substitute payments under Short Sales in Publication 550, Investment Income
and Expenses, for more information about reporting such substitute payments.

Incorrect amount. If you receive a Form 1099 that shows an incorrect amount
(or other incorrect information), you should ask the issuer for a corrected
form. The corrected Form 1099 you receive will be marked "CORRECTED."

Accuracy-related penalty. A 20% accuracy-related penalty may be charged for
underpayments of tax due to negligence or disregard of rules and regulations
or substantial understatement of tax. For more information on the penalty and
any applicable interest, see Penalties in Chapter 1.

Social security number. You must give your name and social security number to
any person required by federal tax law to make a return, statement, or other
document that relates to you. This includes payers of dividends. If you are
married and the funds in a joint account belong to you, you should give your
social security number to the payer of the dividends. If the funds in the
account belong to both you and your spouse, you may give either your number
or your spouse's number, as long as the number you provide corresponds with
the name listed on the account. You must give the payer the correct social
security number if the number being used is wrong.

If you do not give your social security number to the payer of dividends, you
may have to pay a penalty. See Penalty for failure to supply social security
number under Penalties in Chapter 1. Backup withholding also may apply. See
Backup Withholding in Chapter 5.

Dividends received in January. If a regulated investment company (mutual fund)
or real estate investment trust (REIT) declares a dividend (including any
exempt-interest dividend) in October, November, or December and that dividend
is payable to you on a specified date in such month, you are considered to
have received the dividend on December 31 even though the company or trust
actually pays the dividend during January of the following calendar year.
Therefore, you report the amount in the year of declaration.

Ordinary Dividends

Ordinary (taxable) dividends are the most common type of distribution from a
corporation. They are paid out of the earnings and profits of a corporation
and are ordinary income to you. You can assume that any dividend you receive,
whether on common or preferred stock, is an ordinary dividend unless the
paying corporation tells you otherwise.

Money market funds. Report amounts you receive from money market funds as
dividend income. These amounts generally are not interest income and should
not be reported as interest.

Dividends on capital stock. Dividends on the capital stock of organizations,
such as savings and loan associations, are ordinary dividends. They are not
interest. You should report them with your dividend income.

Stock certificate in two or more names. If two or more persons, such as a
husband and wife, hold stock as joint tenants, tenants by the entirety, or
tenants in common, each person receives a share of any dividends from the
stock. Each person's share is determined by local law.

Dividends used to buy more stock. The corporation in which you own stock
may have a dividend reinvestment plan. This plan lets you choose to use your
dividends to buy more shares of stock in the corporation instead of receiving
the dividends in cash. If you are a member of this type of plan and you use
your dividends to buy additional stock at a price equal to its fair market
value, you must report dividends as income.

If you are a member of a dividend reinvestment plan that lets you buy
additional stock at a price less than its fair market value, you must report
as income the fair market value of the additional stock on the dividend
payment date. You also must report as income any service charge subtracted
from your cash dividends before the dividends are used to buy the additional
stock. But you may be able to deduct the service charge amount. See Chapter
30 for more information about deducting expenses of producing income.

In some dividend reinvestment plans, you can invest additional cash to buy
shares of stock at a price less than fair market value. If you choose to do
this, you must report as income the difference between the cash you invest and
the fair market value of the stock you buy. When figuring this income amount,
use the fair market value of the stock on the dividend payment date.

Public utility stock reinvestment plans. If you own stock in a qualified
domestic public utility and chose to receive your dividends in common stock,
rather than in cash, you must include in your gross income the total value
of such stock dividends.

Pre-1986 stock dividend exclusion. If after 1981 and before 1986, you chose
to receive your dividends from the public utility stock in the form of more
stock, you could exclude the value of the dividend from your income.

If you chose to exclude the value of the stock dividend from income before
1986, you were required to exclude it on your return for the year in which
you would have included the dividends in income.

If you excluded the value of stock dividends from income, your basis in that
stock is zero.

Capital Gain Distributions

These distributions or dividends are paid by regulated investment companies,
mutual funds, and real estate investment trusts from their net realized
long-term capital gains. A Form 1099─DIV or the mutual fund statement will
tell you the amount you are to report as a capital gain distribution. Report
capital gain distributions as long-term capital gains on your tax return
regardless of how long you have owned the stock in the mutual fund. Those
distributions that are not derived in the ordinary course of a trade or
business are treated as portfolio income and are not considered as income
from a passive activity (see Passive activity income and losses, earlier).

Undistributed capital gains. In addition to the amounts you receive, you must
report as long-term capital gains any amounts that the investment company or
mutual fund credited to you as capital gain distributions, even though you
did not actually receive them. (This income is not reported to you on Form
1099─DIV.)

Form 2439. You can take a credit on your return for any tax that the
investment company or mutual fund has paid for you on the undistributed
capital gains. The company or fund will send you Form 2439, Notice to
Shareholder of Undistributed Long-Term Capital Gains, showing the amount
of the undistributed long-term capital gain and the tax that was paid.
Take this credit by entering the amount of tax paid and checking the box
on line 59, Form 1040. Attach Copy B of Form 2439 to your return.

Basis adjustment. Increase your basis in the stock by the difference between
the amount of undistributed capital gain that you report and the amount of
the tax paid for you by the fund. Keep Copy C of Form 2439 as part of your
records to show increases in the basis of your stock.

Note. You must report any undistributed long-term gains shown on Form 2439
in addition to any capital gain distributions reported on Form 1099─DIV.

Real estate investment trusts (REITs). You will receive a Form 1099─DIV or
similar statement from the REIT showing the capital gain distributions you
must include in your income. You report the capital gain distributions as
long-term capital gain regardless of how long you owned stock in the REIT.

For more information on the treatment of distributions from mutual funds
and regulated investment companies, see Publication 564, Mutual Fund
Distributions.

Nontaxable Distributions

You may receive a return of capital or a tax-free distribution of additional
shares of stock or stock rights. These distributions are not treated the same
as ordinary dividends or capital gain distributions.

Return of Capital

A return of capital is a distribution that is not paid out of the earnings and
profits of a corporation. It is a return of your investment in the stock of
the company. You should receive a Form 1099─DIV or other statement from the
corporation showing you what part of the distribution is a return of capital.
If you do not receive such a statement, you report the distribution as an
ordinary dividend.

Basis adjustment. A return of capital reduces the basis of your stock and is
not taxed until your basis in the stock is fully recovered. If you buy stock
in a corporation in different lots at different times, reduce the basis of
your earliest purchases first.

When the basis of your stock has been reduced to zero, report any return
of capital that you receive as a capital gain. Whether you report it as a
long-term capital gain or short-term capital gain depends on how long you
have held the stock. See Holding Period in Chapter 15.

Example. You bought stock in 1987 for $100. In 1989, you received a return
of capital of $80. You did not include this amount in your income, but you
reduced the basis of your stock. Your stock now has an adjusted basis of $20.
You receive a return of capital of $30 in 1992. You use $20 of this amount
to reduce your basis to zero. You report the other $10 as a long-term capital
gain for 1992. You must report as a long-term capital gain any return of
capital you receive on this stock in later years.

Liquidating distributions. Liquidating distributions, sometimes called
liquidating dividends, are distributions you receive during a partial or
complete liquidation of a corporation. These distributions are, at least
in part, one form of a return of capital. They may be paid in one or more
installments. You will receive a Form 1099─DIV from the corporation showing
you the amount of the liquidating distribution.

Any liquidating distribution you receive is not taxable to you until you have
recovered the basis of your stock. After the basis of your stock has been
reduced to zero, you must report the liquidating distribution as a capital
gain (except in certain instances with regard to collapsible corporations).
Whether you report the gain as a long-term capital gain or short-term capital
gain depends on how long you have held the stock. See Holding Period in
Chapter 15.

If you acquired stock in a corporation at several different times, you own
more than one block of stock in the corporation. If you receive distributions
from the corporation in complete liquidation, you must divide the distribution
among the blocks of stock you own in the following proportion: the number
of shares in that block over the total number of shares you own. Divide
distributions in partial liquidation among that part of the stock that is
redeemed in the partial liquidation. After the basis of a block of stock
is reduced to zero, you must report the part of any later distribution for
that block as a capital gain.

If the total liquidating distributions you receive are less than the basis of
your stock, you may have a capital loss. You can report a capital loss only
after you have received the final distribution in liquidation that results in
the redemption or cancellation of the stock. Whether you report the loss as a
long-term or short-term capital loss depends on how long you held the stock.
See Holding Period in Chapter 15.

Distributions of Stock and Stock Rights

Distributions by a corporation of its own stock are commonly known as stock
dividends. Stock rights (also known as "stock options") are distributions by
a corporation of rights to subscribe to the corporation's stock. Generally,
stock dividends and stock rights are not taxable to you, and you do not
report them on your return.

Taxable stock dividends and stock rights. Distributions of stock dividends and
stock rights are taxable to you if:

1)  You or any other shareholder has the choice to receive cash or other
    property instead of stock or stock rights,

2)  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,

3)  The distribution is in convertible preferred stock and has the same
    result as in (2),

4)  The distribution gives preferred stock to some common stock shareholders
    and gives common stock to other common stock shareholders, or

5)  The distribution is on preferred stock. (This requirement, however, does
    not apply if the distribution is made for convertible preferred stock
    solely to take into account a stock dividend, stock split, or a similar
    event that would otherwise result in reducing the conversion right.)

In addition, any transaction having the effect of increasing your
proportionate interest in the corporation's assets or earnings and profits
may be taxable to you, even though no stock or stock rights are actually
distributed.

The term "stock" includes rights to acquire such stock, and the term
"shareholder" includes a holder of rights or of convertible securities.

Basis. If you receive taxable stock dividends or stock rights, include their
fair market value at the time of the distribution in your income. This amount
is your basis in the stock or stock rights received. If you receive stock
dividends or stock rights that are not taxable to you, see Stocks and Bonds
under Basis of Investment Property in Publication 550 for information on how
to figure their basis.

Fractional shares. You may not own enough stock in a corporation to receive
a full share of stock if the corporation declares a stock dividend. However,
with the approval of the shareholders, the corporation may set up a plan in
which no fractional shares are issued, but are sold, and the cash proceeds are
given to the shareholders. Any cash you receive for fractional shares under
such a plan is treated as an amount realized on the sale of the fractional
shares. You must determine your gain or loss and report it as a capital gain
or loss on Schedule D (Form 1040). Your gain or loss is the difference between
the cash you receive and the basis of the fractional shares sold.

Example. You own one share of common stock that you bought on January 3, 1991,
for $100. The corporation declared a common stock dividend of 5% on June 30,
1992. The fair market value of your stock at the time the stock dividend was
declared was $200. You were paid $10 for the fractional-share stock dividend
under a plan described in the above paragraph. You figure your gain or loss
as follows:

     Fair market value of old stock ................   $200.00
     Fair market value of stock dividend (cash
        received) ..................................     10.00
                                                     __________
     Fair market value of old stock and stock
     dividend ......................................   $210.00
                                                     ==========
     Basis (cost) of old stock after the stock
        dividend (($200 ÷ $210) x $100) ............    $95.24
     Basis (cost) of stock dividend
        (($10 ÷ $210) x $100) ......................      4.76
                                                     __________
     Total .........................................   $100.00
                                                     ==========
     Cash received .................................    $10.00
     Basis (cost) of stock dividend ................      4.76
                                                     __________
     Gain                                                $5.24
                                                     ==========

Because you had held the share of stock more than one year at the time the
stock dividend was declared, your gain on the stock dividend is a long-term
capital gain.

Other Distributions

You may receive any of the following distributions during the year.

Exempt-interest dividends. Exempt-interest dividends you receive from a
regulated investment company (mutual fund) are not included in your taxable
income. (However, see Information reporting requirement, next.) You will
receive a notice from the mutual fund telling you the amount of the exempt-
interest dividends you received. Exempt-interest dividends are not shown on
Form 1099─DIV or Form 1099─INT. See Gains and Losses in Publication 564 for
information about the loss treatment of mutual fund stock on which you
received exempt-interest dividends.

Information reporting requirement. Although these dividends are not taxable,
you must show them on your tax return if you are required to file. This is
an information-reporting requirement and does not convert exempt-interest
dividends to taxable income. See How to Report Interest Income in Chapter 8.

Also, exempt-interest dividends may be treated as tax-exempt interest from
private activity bonds, which is a "tax preference item" that may be subject
to the alternative minimum tax. See Alternative Minimum Tax in Chapter 31 for
more information.

Dividends on insurance policies. Dividends you receive on insurance policies
are a partial return of the premiums you paid. Do not include them in your
gross income until they are more than the total of all net premiums you paid
for the contract. However, you must report as taxable income the interest paid
or credited on dividends that are left with an insurance company. See Chapter
8 for treatment of interest income.

Dividends on veterans' insurance. Dividends you receive on veterans'
insurance policies are not taxable. In addition, do not report as taxable
income interest on dividends left with the Department of Veterans Affairs.
See Veterans in Chapter 6 for more information about veterans' benefits.

Patronage dividends. Patronage dividends you receive in money from a
cooperative organization are generally included in your income.

Do not include in your income patronage dividends you receive on:

1)  Property bought for your personal use, or

2)  Capital assets or depreciable property bought for use in your business.
    But you must reduce the basis (cost) of the items bought. If the dividend
    is more than the adjusted basis of the assets, you must report the excess
    as income.

These rules are the same whether the cooperative paying the dividend is a
taxable or tax-exempt cooperative.

Alaska Permanent Fund Dividends. Do not report these amounts as dividends.
Instead, report these amounts on line 22 of Form 1040.

How to Report Dividend Income

Generally, you can use either Form 1040 or Form 1040A to report your
dividend income. However, you must use Form 1040 if you receive capital gain
distributions or return of capital distributions. You cannot use Form 1040EZ
if you receive any dividend income.

Form 1099─DIV. If you owned stock on which you received more than $10 in
gross dividends and other distributions, you should receive a Form 1099─DIV.

Box 1a of Form 1099─DIV shows the amount of gross dividends and other
distributions you received on stock. Box 1a is the total of Boxes 1b, 1c,
1d, and 1e.

Box 1b of Form 1099─DIV shows your ordinary dividends. This amount is included
in Box 1a. If you do not need to file Schedule B (Form 1040), or Schedule 1
(Form 1040A), add together the amounts shown in Boxes 1b and 1e and enter the
total on line 9 (Form 1040 or Form 1040A). Also see the paragraph later about
Box 1e.

Box 1c of Form 1099─DIV shows your capital gain distributions. You report
these capital gains on line 5 of Schedule B (Form 1040). You cannot file Form
1040A. Since these capital gains are included in the amount shown in Box 1a of
Form 1099─DIV, you enter them on line 5 of Schedule B and subtract them out on
line 7 of Schedule B. These capital gains are also reported on line 12, Part
II of Schedule D (Form 1040). However, if you do not need to complete Schedule
D for any other capital transactions, report them directly on line 14 of Form
1040.

Box 1d of Form 1099─DIV shows your nontaxable distributions. Since this amount
is included in the amount shown in Box 1a of Form 1099─DIV, you enter it on
line 5 of Schedule B (Form 1040) and subtract it out on line 8 of Schedule B.
Amounts shown are usually a return of capital that reduces your basis in the
stock. Once you have received an amount equal to your cost or other basis,
these distributions are taxable to you as a capital gain even if the payer
lists them as nontaxable.

If you own stock in a nonpublicly-offered regulated investment company, your
pro rata share of that fund's allocable investment expenses is shown in Box
1e of Form 1099─DIV. This amount is also included in Box 1a of Form 1099─DIV.
You can deduct these expenses as a miscellaneous itemized deduction subject to
the 2% of adjusted gross income limit only if you itemize your deductions on
Schedule A (Form 1040).

If you were subject to backup withholding, because, for example, you failed
to furnish your social security number to a payer, the amount withheld will be
shown as "Federal income tax withheld" in Box 2 of Form 1099─DIV. Report this
amount on Form 1040A, line 28a, or on Form 1040, line 54, and check the box.

Box 3 of Form 1099─DIV shows the amount of foreign taxes withheld (paid) on
dividends and other distributions, and Box 4 identifies the foreign country or
U.S. possession that did the withholding. If there are entries in these boxes,
fill out Form 1040 and Form 1116, Foreign Tax Credit. However, do not complete
Form 1116 if you claim this amount as other taxes on Schedule A. For more
information on the credit and deduction, see Publication 514, Foreign Tax
Credit for Individuals.

Box 5 of Form 1099─DIV shows distributions of cash from corporations in
partial or complete liquidation, and Box 6 shows the fair market value of
noncash distributions. If there are entries in these boxes, see Liquidating
distributions under Dividends and Other Corporate Distributions in Publication
550.

Dividends received on restricted stock. Restricted stock is stock that you get
from your employer for services you perform and that is nontransferable and
subject to a substantial risk of forfeiture. You do not have to include the
value of the stock in your income when you receive it. However, if you get
dividends on restricted stock, you must include them in your income as wages,
not dividends.

Your employer should include these dividends in the wages shown on your Form
W─2. If you also get a Form 1099─DIV for these dividends, list them on line 5,
Part II of Schedule B (Form 1040), with the other dividends you received.
Enter a subtotal of all your dividend income several lines above line 6. Below
the subtotal, write "Dividends on restricted stock reported as wages on line
7, Form 1040," and enter the amount of the dividends included in your wages
on line 7, Form 1040. Subtract this amount from the subtotal and enter the
remainder on line 6, Part II of Schedule B.

Election. You can choose to include in gross income the value of restricted
stock as compensation for services. If you make this choice, the dividends
are treated as any other dividends.

If you receive both a Form 1099─DIV and a Form W─2 showing these dividends,
do not include the dividends in your wages reported on line 7, Form 1040.
List the dividends on line 5, Part II of Schedule B, along with your other
dividends. Attach a statement to your Form 1040 explaining why the amount
shown on line 7 of your Form 1040 is different from the amount shown on your
Form W─2.

Dividends on stock sold. 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 report the dividend.
Even if the purchase price of the stock goes up because of the amount of
the anticipated dividend, the owner of record must report such dividend.

Stock sold short. If you borrow stock to make a short sale, you may have
to pay the lender an amount to replace the dividends distributed while you
maintain your short position. Your treatment of the payment depends on the
kind of distribution for which you are reimbursing the lender of the stock.

If your payment is made for a liquidating distribution or nontaxable stock
distribution, or if you buy more shares equal to a stock distribution issued
on the borrowed stock during your short position, you have a capital expense.
You must add the payment to the cost of the stock sold short. See Short Sales
in Publication 550 for more information about the tax treatment of short
sales.

Expenses related to dividend income. You may deduct expenses related to
dividend income only if you itemize your deductions on Schedule A (Form 1040).
See Chapter 30 for general information about deducting expenses of producing
income.

Form 1040A

Report your total dividends on line 9, Form 1040A. If the amount on line 9
is more than $400, you also must list each payer's name and the amount of
dividends received from each payer in Part II of Schedule 1 (Form 1040A) and
attach it to your Form 1040A. If you received a Form 1099─DIV from a brokerage
firm, list the brokerage firm as the payer. However, you must use Form 1040
instead of Form 1040A if you had capital gain distributions or return of
capital distributions. (Exempt-interest dividends, which are treated as
interest, should be reported on line 8b. See How to Report Interest Income
in Chapter 8.)

Nominees (Form 1040A). If you received dividends as a nominee (that is, the
dividends are in your name but actually belong to someone else), include
them on line 5 of Schedule 1. Several lines above line 6, put a subtotal of
all dividend income listed on line 5. Below this subtotal, write "Nominee
Distribution" and show the amounts received as a nominee. Subtract the total
of your nominee distributions from the subtotal. Enter the result on line 6
of Part II.

See Nominees, later, for more information.

Form 1040 - Total Dividends and Other Distributions of $400 or Less

If your total dividends, including capital gain and nontaxable distributions,
are $400 or less, report only the total of your ordinary dividends from Box 1b
of Form 1099─DIV and any investment expenses from Box 1e of Form 1099─DIV on
line 9, Form 1040.

Capital gain distributions. Report capital gain distributions (Box 1c of Form
1099─DIV) on line 12, Part II of Schedule D (Form 1040). If you do not need
Schedule D to report any other capital gains or losses, enter your capital
gain distributions on line 14, Form 1040.

Nontaxable (return of capital) distributions. Some distributions are
nontaxable because they are a return of your cost. You report return of
capital distributions (Box 1d of Form 1099─DIV) as a capital gain only when
your basis in the stock has been reduced to zero. If the basis of your stock
is zero, report any return of capital distributions you receive on line 1d,
Part I of Schedule D, if you held the stock one year or less, or on line 8d,
Part II of Schedule D, if you held the stock for more than one year.

Form 1040 - Total Dividends and Other Distributions of More Than $400

If your total dividends, including capital gain and nontaxable distributions,
are more than $400, you must fill in Schedule B and attach it to your return.
You must complete Parts II and III of Schedule B.

You must report all of your dividend income (Box 1a of Form 1099─DIV) on
line 5, Part II of Schedule B. You must include on this line all the ordinary
dividends, capital gain distributions, and return of capital distributions you
receive. You should list the name of the payer and the amount of income for
each distribution you receive. If your securities are held by a brokerage firm
(in "street name"), list the name of the brokerage firm that is shown on Form
1099─DIV as the payer. If your stock is held by a nominee who is the owner of
record, and the nominee credits or pays you dividends on the stock, you should
show the name of the nominee and the dividends you received or were credited
for. You should enter on line 6 the total of the amounts listed on line 5.
However, if you hold stock as a nominee, see Nominees, later.

Capital gain distributions. You enter on line 7, Part II of Schedule B, any
amount shown on line 5 that is a capital gain distribution. You also enter
this amount on line 12, Part II of Schedule D (Form 1040). If you do not need
to use Schedule D to report any other gains or losses, do not use it. Instead,
show your capital gain distributions on line 14, Form 1040.

Nontaxable (return of capital) distributions. You enter on line 8, Part II of
Schedule B, any amount from line 5 that you received as a return of capital
distribution. However, after the basis of your stock has been reduced to zero,
you must also show this amount on line 1d, Part I of Schedule D, if you held
the stock one year or less, or on line 8d, Part II of Schedule D, if you held
the stock for more than one year.

Completing Schedule B. Add the amounts shown on lines 7 and 8, and enter the
total on line 9. Subtract the amount on line 9 from the amount on line 6. The
difference, if any, is your taxable ordinary dividends. Enter this amount
on line 10, Part II of Schedule B, and on line 9, Form 1040. You must also
complete Part III of Schedule B. See Foreign financial accounts and foreign
trusts under Additional Schedules in Chapter 1 for more information.

Nominees (Form 1040). Include on line 5, Part II of Schedule B (Form 1040),
all dividends you received. This includes dividends you received, as a
nominee, that actually belong to another person (such as your child), even if
you later distributed some or all of this income to others. Enter a subtotal
of all your dividend income listed on line 5 several lines above line 6. Below
the subtotal, write "Nominee Distribution," and show the amounts received
as a nominee. Subtract these distributions from the subtotal, and enter the
remainder on line 6.

If you receive a Form 1099─DIV on which your taxpayer identification number is
shown, and two or more recipients are named, or amounts belonging to another
person are included, you must file a Form 1099─DIV with the IRS to show
the proper distributions of the amounts shown. Complete a Form 1096, Annual
Summary and Transmittal of U.S. Information Returns, and file both forms with
the Internal Revenue Service Center. Give the other person Copy B of the Form
1099─DIV that you filed as a nominee. On Form 1099─DIV and Form 1096, you
should be listed as the "Payer." On Form 1099─DIV, the other owner should
be listed as the "Recipient." You are not required, however, to file a Form
1099─DIV to show payments for your spouse. For more information about the
reporting requirements and the penalties for failure to file (or furnish)
certain information returns, see 1992 Instructions for Forms 1099, 1098, 5498,
and W─2G.

Liquidating distributions. You will receive Form 1099─DIV from the corporation
showing the amount of the liquidating distribution. Generally, this is treated
as the sale or exchange of a capital asset and you should report it on
Schedule D (Form 1040).