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Next year will be the first time I file for taxes. Though I have a pretty good understanding of how taxes work, I just want to confirm whether I need to include stocks that I have not sold and do not yield dividends on my IRS 1040 form.

For example, let's say I want to buy Facebook stocks. Throughout the year, Facebook would not pay out dividends because of its status as a growth company. Therefore, I would have no dividend yield. If I do not sell it, it seems that I do not have to be worried about capital gains/losses.

Therefore, would there be any mention at all on my tax forms about my Facebook stocks? Would I need a 1099-B or even have it issued? I think I know the answer, but I just want to confirm.

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No, you don’t report stock purchases or stock you hold on your tax return.

Also, if the stock is held at a broker, as is typical, you don’t report it as a payer of dividends, either; the dividends are paid to you by the broker.

So, the IRS generally doesn’t know about any specific stock you own until you sell it. (They do know if you own dividend-paying stocks, because they get a report of dividends paid, but they don’t get a report of which stocks you own.)

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    Agree with above answer. – ab2 Dec 26 '19 at 23:12
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    Ddividends are paid to you by your broker (unless you have a direct DRIP with the company). Not that they care but the IRS does know about your ownership of dividend paying stocks because brokers report dividends to the IRS and you must account for them on your tax return if received in a non sheltered account. – Bob Baerker Dec 26 '19 at 23:28
  • Thank you for answering my question! Wait. So if I have this time dividend yielding stocks through a brokerage like Robinhood, dividends that are paid out don't need to be reported on my tax return? They must still need to be included somewhere and accounted in my total income though, no? – ARJ Dec 26 '19 at 23:46
  • @Bob, yes your broker report dividends paid to the IRS, but it doesn’t report which stocks you hold, right? It just reports aggregate dividends, as far as I know. – prl Dec 27 '19 at 1:41
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    @BobBaerker+ on every US broker I have used they provide a 'substitute' 1099-DIV with the totals (only), and on a separate page labelled something like 'suppplemental information not reported to IRS' they have the breakdown by holding. – dave_thompson_085 Dec 27 '19 at 10:46
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To your question as asked, but not your example and probably not your intent, there is (since a few years ago) one exception. If you directly own stock of a foreign (non-US) issuer (i.e. NOT an ADR held in a US account, or a mutual fund, which are the easy ways to invest 'abroad') -- or you own anything (not just stock) in a foreign bank or financial institution account -- and the (total) value is over a threshold which varies depending on where you live and if you are married filing jointly -- $50,000 to $150,000 for living in the US -- you must report such foreign assets on form 8938 even with no income or disposition.

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  • would this include an ETF fund such as the VT, which is a world index? Or would Vanguard be responsible for reporting those foreign assets? – Robert Houghton Dec 29 '19 at 1:43
  • Robert: as I said 'not ... a mutual fund' (including ETF) -- if held in a US account (e.g. broker). For an ETF it is the US broker that reports, not the issuer (here Vanguard); a trad fund might be either direct (and reported by the issuer) or street name (and reported by the broker). If you held such a fund (or anything else) with a foreign broker, you would need to report that foreign broker account (if over the threshold), but not separately the holding(s) in it (either US or on-US). – dave_thompson_085 Dec 29 '19 at 9:14
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If I do not sell it, it seems that I do not have to be worried about capital gains/losses.

Correct. You do not inform the IRS (via Form 1040 Schedule D) of capital gains and losses until you realize them (which is a fancy way of saying that you sold the underlying securities).

would there be any mention at all on my tax forms about my Facebook stocks?

Never. They don't want to know. All they care about is the total amount of short and long term realized gains/losses.

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  • when you "realize" the gains does that mean your brokerage account (the cash portion) is increased or is it "realized" the moment you deposit those earnings into your commercial bank? Maybe a silly question, but thought I'd ask. I just learned many brokerages are FDIC insured! – Robert Houghton Dec 29 '19 at 1:48
  • Brokerages are not banks, so they aren't and can't be FDIC insured. What they do is contract with a bank to hold your cash. That's what's insured. – RonJohn Dec 29 '19 at 1:57
  • Gains (and losses) are only realized when you sell the security. It has nothing to do with the earnings. And what's deposited in your cash account at the brokerage (or actual cash under your mattress if you sold for cash actual paper shares in a privately owned company) has nothing to do with whether the value of the stock increased or decreased while you owned it. – RonJohn Dec 29 '19 at 2:03

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