Form 1099-B - Return of Principal Return of Capital

**The information below has not been verified for the 2020 tax year as the IRS Pub. 550 has not yet been released by the IRS.**

Information reported to you regarding a return of capital (principal) would be supplemental information on Form 1099-B Proceeds From Broker and Barter Exchange Transactions. Generally, this amount would be reported to you in Box 1d. You would use this amount to reduce the basis in the stock if it is still owned.

When entering the information into the TaxAct program, you will enter the same amount for Sales Proceeds and Cost/Basis. However, if the return of capital or principal is more than your basis, then you will need to report a capital gain equal to the amount received in excess of your basis.

Additional Information

Per IRS Publication 550 Investment Income and Expenses, on page 40:

Stocks and Bonds

The basis of stocks or bonds you own is generally the purchase price plus the costs of purchase, such as commissions and recording or transfer fees. If you acquired stock or bonds other than by purchase, your basis is usually determined by fair market value or the previous owner's adjusted basis as discussed earlier under Basis Other Than Cost.

The basis of stock must be adjusted for certain events that occur after purchase. For example, if you receive more stock from nontaxable stock dividends or stock splits, you must reduce the basis of your original stock. You must also reduce your basis when you receive nondividend distributions (discussed in chapter 1). These distributions, up to the amount of your basis, are a nontaxable return of capital.

Note that any link in the information above is updated each year automatically and will take you to the most recent version of the document at the time it is accessed.