Return of Capital Distribution

Return of Capital Distribution

A return of a capital distribution is a distribution that is not from the corporation's earnings and profits. The distribution is not taxable, but reduces the basis of the stock. Distributions in excess of basis are taxed as capital gain.
References in periodicals archive ?
312(f)(2); therefore, the E&P consequences stemming from an extraordinary dividend should produce the same effect as a return of capital distribution under Sec.
A return of capital distribution does not necessarily reflect the fund s investment performance and should not be confused with yield or income.
A return of capital distribution does not necessarily reflect the Fund's investment performance and should not be confused with "yield" or "income.
The seller is able to increase his basis in the acquiring corporation by the amount of his basis in the issuing corporation in order to determine the extent of any return of capital distribution.
However, this provision is not applicable to a return of capital distribution.
93-2, Determination, Disclosure, and Financial Statement Presentation of Income, Capital Gain, and Return of Capital Distributions by Investment Companies, provides guidance on financial reporting by investment companies for shareholder distributions, including returns of capital.