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Publication 17
Your Federal Income Tax

For Individuals

For use in preparing 2002 Returns


Other Distributions

You may receive any of the following distributions during the year.

Exempt-interest dividends.   Exempt-interest dividends you receive from a regulated investment company (mutual fund) are not included in your taxable income. You will receive a notice from the mutual fund telling you the amount of the exempt-interest dividends you received. Exempt-interest dividends are not shown on Form 1099-DIV or Form 1099-INT.

Information reporting requirement.   Although exempt-interest dividends are not taxable, you must show them on your tax return if you have to file a return. This is an information reporting requirement and does not change the exempt-interest dividends to taxable income.

Alternative minimum tax treatment.   Exempt-interest dividends paid from specified private activity bonds may be subject to the alternative minimum tax. See Alternative Minimum Tax in chapter 31 for more information.

Dividends on insurance policies.   Insurance policy dividends that the insurer keeps and uses to pay your premiums are not taxable. However, you must report as taxable interest income the interest that is paid or credited on dividends left with the insurance company.

If dividends on an insurance contract (other than a modified endowment contract) are distributed to you, they are a partial return of the premiums you paid. Do not include them in your gross income until they are more than the total of all net premiums you paid for the contract. (For information on the treatment of a distribution from a modified endowment contract, see Distribution Before Annuity Starting Date From a Nonqualified Plan under Taxation of Nonperiodic Payments in Publication 575, Pension and Annuity Income.) Report any taxable distributions on insurance policies on line 16b (Form 1040) or line 12b (Form 1040A).

Dividends on veterans' insurance.   Dividends you receive on veterans' insurance policies are not taxable. In addition, interest on dividends left with the Department of Veterans Affairs is not taxable.

Patronage dividends.   Generally, patronage dividends you receive in money from a cooperative organization are included in your income.

Do not include in your income patronage dividends you receive on:

  1. Property bought for your personal use, or
  2. Capital assets or depreciable property bought for use in your business. But you must reduce the basis (cost) of the items bought. If the dividend is more than the adjusted basis of the assets, you must report the excess as income.

These rules are the same whether the cooperative paying the dividend is a taxable or tax-exempt cooperative.

Alaska Permanent Fund dividends.   Do not report these amounts as dividends. Instead, report these amounts on line 21 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ.

How To Report Dividend Income

Generally, you can use either Form 1040 or Form 1040A to report your dividend income. Report the total of your ordinary dividends on line 9 of Form 1040 or Form 1040A.

If you receive capital gain distributions, you may be able to use Form 1040A or you may have to use Form 1040. See Capital gain distributions only in chapter 17. If you receive nontaxable distributions required to be reported as capital gains, you must use Form 1040. You cannot use Form 1040EZ if you receive any dividend income.

Form 1099-DIV.   If you owned stock on which you received $10 or more in dividends and other distributions, you should receive a Form 1099-DIV. Even if you do not receive Form 1099-DIV, you must report all of your taxable dividend income.

See Form 1099-DIV for more information on how to report dividend income.

Form 1040A.    You must complete Part II of Schedule 1 (Form 1040A) and attach it to your Form 1040A, if:

  1. Your ordinary dividends (box 1 of Form 1099-DIV) are more than $1,500, or
  2. You received, as a nominee, dividends that actually belong to someone else.

List on line 5 each payer's name and the amount of ordinary dividends you received. If you received a Form 1099-DIV from a brokerage firm, list the brokerage firm as the payer.

Enter on line 6 the total of the amounts listed on line 5. Also enter this total on line 9, Form 1040A.

Form 1040.   You must fill in Part II of Schedule B and attach it to your Form 1040, if:

  1. Your ordinary dividends (box 1 of Form 1099-DIV) are more than $1,500, or
  2. You received, as a nominee, dividends that actually belong to someone else.

If your ordinary dividends are more than $1,500, you must also complete Part III of Schedule B.

List on line 5, Part II of Schedule B, each payer's name and the amount of ordinary dividends you received. If your securities are held by a brokerage firm (in street name), list the name of the brokerage firm that is shown on Form 1099-DIV as the payer. If your stock is held by a nominee who is the owner of record, and the nominee credited or paid you dividends on the stock, show the name of the nominee and the dividends you received or for which you were credited.

Enter on line 6 the total of the amounts listed on line 5. Also enter this total on line 9, Form 1040.

Expenses related to dividend income.   You may be able to deduct expenses related to dividend income if you itemize your deductions on Schedule A (Form 1040). See chapter 30 for general information about deducting expenses of producing income.

More information.   For more information about how to report dividend income, see chapter 1 of Publication 550 or the instructions for the form you must file.

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