How to treat Non-Dividend Distributions on Ameritrade Tax Statement for tax filing

I'm helping my sister prepare her taxes this year and I'm confused about how to handle some items on her Ameritrade statement. She's got the following on her tax statement: Ordinary Dividends of $63, Non-Dividend Distributions of $845, Proceeds of $3,390, Cost Basis of $8,115, and a Net Loss of ($4,725). I know I need to prepare Schedule D and Form 8949 for her, but I'm stuck on how to properly report this Non-Dividend Distribution of $845. My initial thought was to just claim the capital loss of $4,725 (well, limit it to $3,000 for this year and carry forward the remaining $1,725). But after some research, I'm wondering if I should actually reduce her Cost Basis by the $845 Non-Dividend Distribution amount? So that would change the Cost Basis from $8,115 down to $7,270, making her capital loss $3,880 instead? I'll report the $63 of Ordinary Dividends on line 3b of the 1040, that part seems straightforward. FYI - these were her only stock transactions for the year, and all the stocks she sold were held for over 12 months. Thanks for any help on handling this correctly!

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18 comments

Malik Johnson

•8M

The right approach here is to reduce the cost basis by the amount of the Non-Dividend Distribution. This is because Non-Dividend Distributions are typically a return of capital, not taxable income when received. When you get a return of capital, it's not immediately taxable, but it reduces your investment basis. So you're on the right track - you should reduce the cost basis from $8,115 to $7,270, resulting in a long-term capital loss of $3,880 (since Proceeds were $3,390). You can report the full $3,000 of capital losses on this year's return, with the remaining $880 carried forward to next year. And yes, report the $63 of ordinary dividends on line 3b of the 1040. Make sure you keep good records of this adjustment in case your sister needs to reference it in the future, especially for the loss carryforward.

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Malik Johnson

•8M

If the Non-Dividend Distribution exceeds the cost basis, then yes, the excess becomes taxable as a capital gain. This is because you can't reduce your basis below zero, so any additional return of capital is considered a gain at that point. For your second question, you'll need to make these adjustments manually when preparing the tax return. The 1099-DIV just reports the distribution amounts, but it doesn't make the calculation adjustments for you. That's why many people miss this step and either over-report or under-report their capital gains/losses. You'll need to adjust the basis on Form 8949 when reporting the sales.

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Ravi Sharma

•8M

After dealing with a similar situation, I found https://taxr.ai incredibly helpful with my investment statements. My Ameritrade forms had a mix of qualified dividends, non-dividend distributions, and some short/long-term sales that I wasn't sure how to handle. The platform analyzed my tax documents and showed me exactly how to handle each type of distribution and which lines they go on. For the non-dividend distributions, it confirmed I needed to reduce my cost basis rather than reporting it as income. It also identified a few transactions that were misclassified on my statement that would have caused problems during filing.

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Ravi Sharma

•8M

It handles inherited investments by recognizing the stepped-up basis information if it's on your tax documents. For wash sales, it specifically flags these and explains the impact on your cost basis and holding period. I had a couple of wash sales last year and it caught them right away. The system works with pretty much all major brokerage statements - I've used it with Ameritrade, Fidelity, and Schwab documents without issues. Each brokerage has different formatting but the AI is trained on all the common variations. It definitely distinguishes between qualified and non-qualified dividends, and even explains which dividends qualify for preferential tax rates.

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Omar Hassan

•8M

I tried taxr.ai after seeing the recommendation here and I'm honestly surprised how well it worked. I was about to file with my non-dividend distributions incorrectly reported as income, which would've cost me extra tax. The system flagged it immediately and explained that the $924 non-dividend distribution I received should reduce my cost basis instead. It also caught a few other issues - some of my dividends were qualified but I was about to report them all as ordinary, and I had a wash sale I didn't even realize happened. Saved me from making at least 3 significant mistakes that would have either cost money or potentially triggered an audit notice. For anyone dealing with investment tax forms, definitely worth checking out before finalizing your return.

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Chloe Taylor

•8M

If you need help verifying your tax treatment directly with the IRS, I highly recommend using https://claimyr.com to get through to an agent. I had a similar question about non-dividend distributions last year and was stuck on hold for hours trying to reach the IRS. With Claimyr, I got through to an IRS representative in about 15 minutes who confirmed exactly how to handle it. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c They basically wait on hold for you and call when an agent picks up. Saved me a ton of time and frustration, especially during tax season when wait times can be 2+ hours. The IRS agent I spoke with confirmed that reducing the cost basis by the non-dividend distribution amount was the correct approach.

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Chloe Taylor

•8M

They don't have a special line - they use automated systems to wait on hold for you. They place the call, navigate the menu options, and then when an actual human IRS agent answers, they connect the call to your phone. So you're getting the exact same service, just without having to waste hours of your day listening to hold music. If they can't get through to the IRS after multiple attempts, they actually refund your payment. But that hasn't happened in my experience - they've always managed to get through, just at varying times depending on how busy the IRS lines are. They don't promise immediate service, just that you won't have to be the one sitting on hold.

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Diego Ramirez

•8M

I'm eating my words about Claimyr. After posting my skeptical comment, I was desperate to talk to the IRS about a letter I received related to some investment sales reporting issues. Decided to try the service as a last resort and it actually worked exactly as described. The system called me back after 47 minutes (still way better than my previous attempts) and connected me directly to an IRS agent. I asked about the proper treatment of non-dividend distributions, and the agent confirmed it should reduce the cost basis of the investment rather than be treated as taxable income. For anyone struggling to get through to verify tax treatment of investments, it's worth checking out. Didn't think I'd be recommending this but it solved a problem I'd been dealing with for weeks.

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Anastasia Sokolov

•8M

Don't forget Box 15 on your 1099-DIV should tell you how to treat the Non-Dividend Distribution. There are different codes that indicate if it's a return of capital (ROC) or something else. Most commonly it's code "R" for return of capital, which is when you reduce your basis. If the amount exceeds your basis, you record a capital gain. It's actually not that complicated once you understand the principle - they're basically returning part of your investment back to you tax-free, but tracking it by reducing your cost basis.

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Anastasia Sokolov

•8M

Yes, that's exactly right. On Form 8949, you'll enter the original cost basis of $8,115 in column (e), then in column (g) you'll enter the adjustment amount of -$845 with code "B" which stands for "Basis adjustment." Then your adjusted basis in the calculation becomes $7,270. Make sure to check the right box at the top of Form 8949 for long-term transactions reported on a 1099-B with basis reported to the IRS. The form has clear instructions for these adjustments, and this way you're documenting exactly why your basis is different from what was reported to the IRS on the 1099-B.

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Sean O'Connor

•8M

Just a tip - I use FreeTaxUSA for filing and it handles this situation really well. When you enter the 1099-DIV information, there's a specific field for non-dividend distributions. Then when you enter the stock sales info, it prompts you to adjust the cost basis accordingly. Much easier than trying to figure it all out manually. If the distributions are return of capital (which they usually are), the software automatically adjusts the basis. It's saved me a ton of headaches with my investment reporting.

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