'katytrader' pid='81132' datel Wrote:
September's Monthly Statement from the Schwab brokerage showed that it treated the CRP as some sort of liquidation and lumped it in with Dividends and Interest rather than a capital transaction. Fidelity and TDAmeritrade treated it as a sale against a zero-cost asset. Implication for US taxpayer is that Schwab is likely to treat CRP as a dividend or interest payment on the 1099 sent to IRS.My call to Schwab elicited a response of kicking issue back to tax group and/or others for review.
Did any Schwab clients in SHU have their CRP payment treated as a sale of an asset?
katytrader
Katy:
I've looked into this and I believe that the CRP payment should be treated as a 'cash liquidation distribution'. Liquidating distributions (either cash or noncash) are a form of a return of capital. Any liquidating distribution you receive is not taxable to you until you recover the basis of your stock. After the basis of your stock is reduced to zero, you must report the liquidating distribution as a capital gain [long-term]. Thus, the CRP is only taxable to the extent that it exceeds one's cost basis and is only taxable as a long-term capital gain, and not as a dividend, despite being reported on a 1099-DIV. Schwab should report this in BOX 8 of the 1099-DIV as a 'cash liquidation distribution' for a liquidating corporation.