Long-term capital gains apply if the holding period is at least one year and a day from the trade date.
Conversely, if an investor does not recover the total investment, she can report a capital loss.
This return can be made in more than one distribution if a shareholder purchased blocks of stock over time, as opposed to making a one-time purchase.
Until or unless a shareholder recovers her total investment, the amount reported on a 1099-DIV is not considered taxable income.
This means each shareholder must recognize a taxable gain (or loss) equal to the difference between the distribution amount and the shareholder’s basis in the stock relinquished in the liquidating transaction.