Cora owns 6,000 shares of KLM stock, 2,000 shares of BBT Mutual fund, and 10,000 shares of Centex Corporation.Her 1099-DIV forms from these investments showed the following: KLM: $3 per share distribution all reinvested in KLM
BBT Mutual fund: $5 per share distribution, $1 of which represents a capital gain distribution; none of this is reinvested.
Centex: $2 per share distribution, all of which represents a return of capital.
How much must Cora include in her income in the current year?

Question

Quizplus · Accepted Answer

Cora must include in her income the distributions from KLM and the ordinary income portion of the BBT Mutual fund distribution. The KLM distribution is $3 per share for 6,000 shares, totaling $18,000. The BBT Mutual fund distribution is $4 per share (excluding the $1 capital gain) for 2,000 shares, totaling $8,000. The Centex distribution is a return of capital and does not count as income. Therefore, the total income is $18,000 (KLM) + $8,000 (BBT) = $26,000. However, due to a mistake in calculation, the correct total should have been calculated as follows: KLM: 6,000 shares * $3/share = $18,000; BBT: 2,000 shares * $5/share = $10,000 (since the entire distribution is income, but only $1 of the $5 is a capital gain, the rest is still income); Centex: $0 (return of capital is not income). This means the correct answer should be the sum of the income from KLM and BBT, which is $18,000 + $10,000 = $28,000. The initial explanation mistakenly excluded part of the BBT distribution from income.

Cora Owns 6,000 Shares of KLM Stock, 2,000 Shares of BBT