How to enter Altaba Inc. (AABA) liquidating Dividend in Quicken?

Gail9@

Altaba Inc. (AABA) (was Yahoo) on 9/23/2019 distributed the 1st of several "liquidating dividends". Not sure how to enter in Quicken Premier.

q_lurker

The Return of Capital transaction appears to make sense up to your cost basis in the holding.  You cannot claim a RtrnCap amount that takes your cost basis negative.  Any distribution in excess of your cost basis would possibly be considered a dividend. 

You may need to research this further with your tax/financial advisor (more preferable) or broker (less preferable).  I spent less than 10 minutes looking up info on this and I have no recognizable financial training or expertise.

q_lurker

A few more minutes of research yielded this link:
https://www.altaba.com/investor-faqs
There is an FAQ there dealing with tax consequences. 

My read on that presentation is consistent with the prior RtrnCap comments.  But any distribution beyond your cost basis appears to come in as Cap gains - as if you sold the shares with the final distribution; not as a dividend.

NotACPA

Try "Return of Capital"

q_lurker

The Return of Capital transaction appears to make sense up to your cost basis in the holding.  You cannot claim a RtrnCap amount that takes your cost basis negative.  Any distribution in excess of your cost basis would possibly be considered a dividend. 

You may need to research this further with your tax/financial advisor (more preferable) or broker (less preferable).  I spent less than 10 minutes looking up info on this and I have no recognizable financial training or expertise.

q_lurker

A few more minutes of research yielded this link:
https://www.altaba.com/investor-faqs
There is an FAQ there dealing with tax consequences. 

My read on that presentation is consistent with the prior RtrnCap comments.  But any distribution beyond your cost basis appears to come in as Cap gains - as if you sold the shares with the final distribution; not as a dividend.

Gail9@

Many thanks. I thought this might be the answer. And as this is only the first distribution from AABA guess this will be a high tax year. Bummer!

NotACPA

Gail9@ said:

Many thanks. I thought this might be the answer. And as this is only the first distribution from AABA guess this will be a high tax year. Bummer!

I don't believe that Return of Capital transactions are taxable .... as they merely represent the return to you of your own money.  And CapGains have preferential treatment also.

NotACPA

Here's the key paragraph re: tax consequences:

"In general, a non-U.S. stockholder will not be subject to U.S. federal income or withholding tax with respect to any gain realized on a liquidating distribution unless (1) the gain is effectively connected with the stockholder’s conduct of a U.S. trade or business (and, if required by an applicable income tax treaty, is attributable to a U.S. permanent establishment), or (2) in the case of a non-U.S. stockholder that is a nonresident alien individual, the stockholder is present in the United States for 183 or more days in the taxable year of the liquidating distribution and certain other requirements are met. A non-U.S. stockholder that holds Altaba common stock through an account with a U.S. financial institution or other withholding agent (such as a broker-dealer) should consult that institution regarding the U.S. withholding requirements."

Jim_Harman

That paragraph applies to non-US stockholders. Is that the OP's situation?

NotACPA

Jim_Harman said:

That paragraph applies to non-US stockholders. Is that the OP's situation?

Good catch.  I grabbed the wrong paragraph. Here's the one for US citizens.

A liquidating distribution received by a U.S. stockholder will first be applied against and reduce the stockholder’s adjusted tax basis in its Altaba common stock, before the stockholder recognizes any gain or loss. A U.S. stockholder will recognize gain as a result of a liquidating distribution to the extent that the aggregate value of the liquidating distribution and any prior liquidating distributions received by the stockholder with respect to a share exceeds the stockholder’s adjusted tax basis in the share. A U.S. stockholder generally cannot recognize a loss on a liquidating distribution until the final liquidating distribution is made, and then only if the aggregate value of all liquidating distributions with respect to a share is less than the stockholder’s adjusted tax basis in the share. If a U.S. stockholder holds different blocks of Altaba common stock (generally as a result of having acquired shares at different times or at different prices), gain or loss is calculated separately with respect to each such block. Any gain or loss recognized by a U.S. stockholder will be capital gain or loss provided the stockholder holds its Altaba common stock as a capital asset.

Gail9@

Thanks all. Good information.

q_lurker

Gail9@ said:

Many thanks. I thought this might be the answer. And as this is only the first distribution from AABA guess this will be a high tax year. Bummer!

Let's try this with some rough numbers.  

Stock was worth $70/sh just prior to liqudation announcement.  
In October, stock paid initial $50 of liquidation amount.  Presumably there may be another $20 (remaining cash value less upcoming taxes and expenses) yet to come over the next couple of years.

If you paid $60/share for your shares, the $50 initial liquidation amount would be non-taxable.  The next $10 would also be non-taxable.  Anything over that would be taxed at capital gains rates.

If you paid $10/share, $10 of that initial $50 is non-taxable.  The next $40 received this year is taxable at cap gain rates.  Any distributions in future years would be similarly taxed at cap gains rates. 

Maybe a bummer -- but only if it was a profitable investment.

Gail9@

In my case it was a profitable investment. So will pay taxes. Just wish there was no liquidation. Again thanks for the detailed information.