Personal Income Tax Returns and Cash Flow (Session #4)
Q: Are capital gain distributions on line 13 of Schedule D cash events to the individual? If so, are they always cash events?
A: Yes. Capital gain distributions are paid from net realized long-term capital gains. Capital gains distributions are reported at Line 13 of Schedule D as part of a personal income tax filing included with Form 1040 are cash events to the individual.
If a business entity, such as Sandover Contractors, Inc., received capital gain distributions, they would customarily be reported at Line 8a on Schedule K in the business income tax returns (Form 1120S) and then at Line 8a on Schedule K-1 (Form 1120S). The owner and taxpayer would then report the Line 8a amount from the Schedule K-1 at Line 12 on Schedule D in his personal income tax returns. The amount reported at Line 12 on Schedule D is cash to Sandover Contractor, Inc. but non-cash to the taxpayer – Douglas McPherson in this instance.
Course overview: Personal Income Tax Returns and Cash Flow