What type of dividends are reported on Forms 1099-DIV for common and preferred stock?

Ordinary dividends are reported on Forms 1099-DIV for both common and preferred stock. This type of dividend refers to payments made to shareholders out of a corporation's earnings and profits. These payments are typically taxable income for the recipient in the year they are received, unless they qualify for special tax treatment, such as being classified as qualified dividends under specific conditions.

The classification as ordinary dividends means that they are part of the standard income that shareholders expect from their investment in stocks, reflecting the return on their investment. This is a common practice for corporations that distribute accumulated earnings back to their shareholders.

In contrast, capital gain dividends are reported separately when they come from mutual funds and are related to the sale of assets within the fund. Nondividend distributions refer to distributions that are not taxable as dividends but can reduce the basis of the stock. Bonus dividends are not a standard tax reporting term and do not have a defined meaning in IRS regulations. Therefore, ordinary dividends is the accurate choice in the context of reporting on Form 1099-DIV.