Instructions For Form 1040 - U.s. Individual Income Tax Return - 2016 Page 23

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2017 Form 1040—Lines 9a Through 10
dends that actually belong to someone
Dividends attributable to periods
Fund paid a cash dividend of 10 cents a
else.
totaling more than 366 days that you re-
share. The ex-dividend date was July 16,
ceived on any share of preferred stock
2017. The ABC Mutual Fund advises
Nondividend Distributions
held for less than 91 days during the
you that the part of the dividend eligible
181-day period that began 90 days be-
to be treated as qualified dividends
Some distributions are a return of your
fore the ex-dividend date. When count-
equals 2 cents a share. Your Form
cost (or other basis). They won't be
ing the number of days you held the
1099-DIV from ABC Mutual Fund
taxed until you recover your cost (or
stock, you can't count certain days dur-
shows total ordinary dividends of $1,000
other basis). You must reduce your cost
ing which your risk of loss was dimin-
and qualified dividends of $200. How-
(or other basis) by these distributions.
ished. See Pub. 550 for more details.
ever, you sold the 10,000 shares on Au-
After you get back all of your cost (or
Preferred dividends attributable to peri-
gust 11, 2017. You have no qualified
other basis), you must report these dis-
ods totaling less than 367 days are sub-
dividends from ABC Mutual Fund be-
tributions as capital gains on Form 8949.
ject to the 61-day holding period rule
cause you held the ABC Mutual Fund
For details, see Pub. 550.
just described.
stock for less than 61 days.
Dividends on insurance policies
Dividends on any share of stock to
Use the Qualified Dividends
are a partial return of the pre-
TIP
the extent that you are under an obliga-
and Capital Gain Tax Work-
TIP
miums you paid. Don’t report
tion (including a short sale) to make re-
sheet or the Schedule D Tax
them as dividends. Include them in in-
lated payments with respect to positions
Worksheet, whichever applies, to figure
come on line 21 only if they exceed the
in substantially similar or related proper-
your tax. See the instructions for line 44
total of all net premiums you paid for
ty.
for details.
the contract.
Payments in lieu of dividends, but
only if you know or have reason to
Line 10
Line 9b
know that the payments aren't qualified
dividends.
Taxable Refunds, Credits, or
Qualified Dividends
Example 1. You bought 5,000 shares
Offsets of State and Local
of XYZ Corp. common stock on July 8,
Enter your total qualified dividends on
Income Taxes
2017. XYZ Corp. paid a cash dividend
line 9b. Qualified dividends also are in-
of 10 cents per share. The ex-dividend
cluded in the ordinary dividend total re-
None of your refund is taxable
date was July 16, 2017. Your Form
quired to be shown on line 9a. Qualified
if, in the year you paid the tax,
TIP
1099-DIV from XYZ Corp. shows $500
dividends are eligible for a lower tax
you either (a) didn't itemize de-
in box 1a (ordinary dividends) and in
rate than other ordinary income. Gener-
ductions, or (b) elected to deduct state
box 1b (qualified dividends). However,
ally, these dividends are shown in
and local general sales taxes instead of
you sold the 5,000 shares on August 11,
box 1b of Form(s) 1099-DIV. See Pub.
state and local income taxes.
2017. You held your shares of XYZ
550 for the definition of qualified divi-
Corp. for only 34 days of the 121-day
dends if you received dividends not re-
If you received a refund, credit, or offset
period (from July 9, 2017, through Au-
ported on Form 1099-DIV.
of state or local income taxes in 2017,
gust 11, 2017). The 121-day period be-
you may be required to report this
Exception. Some dividends may be re-
gan on May 17, 2017 (60 days before
amount. If you didn't receive a Form
ported as qualified dividends in box 1b
the ex-dividend date), and ended on
1099-G, check with the government
of Form 1099-DIV but aren't qualified
September 14, 2017. You have no quali-
agency that made the payments to you.
dividends. These include:
fied dividends from XYZ Corp. because
Your 2017 Form 1099-G may have been
Dividends you received as a nomi-
you held the XYZ stock for less than 61
made available to you only in an elec-
nee. See the Schedule B instructions.
days.
tronic format, and you will need to get
Dividends you received on any
Example 2. The facts are the same as
instructions from the agency to retrieve
share of stock that you held for less than
in Example 1 except that you bought the
this document. Report any taxable re-
61 days during the 121-day period that
stock on July 15, 2017 (the day before
fund you received even if you didn't re-
began 60 days before the ex-dividend
the ex-dividend date), and you sold the
ceive Form 1099-G.
date. The ex-dividend date is the first
stock on September 16, 2017. You held
date following the declaration of a divi-
If you chose to apply part or all of the
the stock for 63 days (from July 16,
dend on which the purchaser of a stock
refund to your 2017 estimated state or
2017, through September 16, 2017). The
isn't entitled to receive the next dividend
local income tax, the amount applied is
$500 of qualified dividends shown in
payment. When counting the number of
treated as received in 2017. If the refund
box 1b of Form 1099-DIV are all quali-
days you held the stock, include the day
was for a tax you paid in 2016 and you
fied dividends because you held the
you disposed of the stock but not the day
deducted state and local income taxes on
stock for 61 days of the 121-day period
you acquired it. See the examples that
line 5 of your 2016 Schedule A, use the
(from July 16, 2017, through September
follow. Also, when counting the number
State and Local Income Tax Refund
14, 2017).
of days you held the stock, you can't
Worksheet in these instructions to see if
count certain days during which your
Example 3. You bought 10,000
any of your refund is taxable.
risk of loss was diminished. See Pub.
shares of ABC Mutual Fund common
Exception. See Itemized Deduction Re-
550 for more details.
stock on July 8, 2017. ABC Mutual
coveries in Pub. 525 instead of using the
-23-
Need more information or forms? Visit IRS.gov.

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