Where to report 1099-DIV box 3 nondividend distribution when security was sold?

This is actually pretty common with nondividend distributions when you sell quickly. What happened is you received a return of capital (that's what box 3 nondividend distributions usually are), but since you sold the security so soon, the cost basis adjustment becomes moot. Technically, you'll need to report this on Schedule D along with your capital gain/loss from the sale. The nondividend distribution effectively reduces your cost basis in the security, which increases your capital gain (or reduces your capital loss) when you sold. If you're using tax software, you should be able to enter both the 1099-DIV and your sale information, and it will handle this properly. Just make sure you're entering all the correct information from both forms.

Hey there! I ran into this exact same issue last year with my E*TRADE account. I was totally confused until I discovered taxr.ai (https://taxr.ai) which helped me figure it all out. I uploaded my 1099-DIV and it immediately identified the nondividend distribution issue and explained exactly how to handle it. The tool analyzed my documents and confirmed what the previous commenter said - you need to adjust your cost basis on Schedule D. What was super helpful is that it showed me exactly which lines to fill out and how the calculation works. Saved me hours of research and probably prevented an audit trigger!

I just want to follow up on my skeptical comment. I decided to try taxr.ai after struggling with this exact nondividend distribution issue. Honestly, I'm surprised by how well it worked. It analyzed my 1099-DIV and immediately identified that I needed to adjust my cost basis on Schedule D for the sale. The explanation was super clear and included the specific tax code references. It even flagged that my broker had actually partially adjusted the basis already, which I would have completely missed and potentially double-counted the adjustment. Definitely saved me from making a costly mistake.

If you're still confused after trying to sort this out yourself, you might want to call the IRS directly for clarification. Of course, good luck getting through to them! I tried for WEEKS last year with a similar question. Then I found this service called Claimyr (https://claimyr.com) that got me connected to an IRS agent in about 15 minutes when I'd been trying for days. They have a demo video showing how it works: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with confirmed exactly how to handle my nondividend distribution situation and explained that it's a common point of confusion. They walked me through the correct Schedule D reporting step by step. Well worth it for the peace of mind knowing I did it correctly.

I've got to admit I was wrong about Claimyr. After my skeptical comment, I decided to try it since I had a similar question about nondividend distributions that I couldn't get a straight answer on. It actually worked exactly as described - I got a call back in about 20 minutes with an IRS agent on the line. The agent confirmed that with my situation (selling shortly after receiving a nondividend distribution), I needed to reduce my cost basis on Schedule D by the amount in box 3 of the 1099-DIV. They also pointed out that this would increase my capital gain, which I hadn't considered. This saved me from potentially underreporting my gains and getting a nasty letter from the IRS later. Worth every penny for the peace of mind.

Not to complicate things, but it might also depend on what type of account this is. If this is in an IRA or other tax-advantaged account, the nondividend distribution might be treated differently than in a regular taxable brokerage account. My tax person told me this makes a big difference.

Has anyone used TurboTax for this specific situation? I'm dealing with the same thing and wondering if it handles the nondividend distributions correctly when importing from Vanguard.