return of capital


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Return of capital

A cash distribution resulting from the sale of a capital asset, or securities, or tax breaks from depreciation.

Capital Dividend

A dividend that comes from what an investor has paid into a publicly-traded company, rather than from its earnings. That is, a capital dividend occurs when a company gives back what the investor has invested. It may occur when a company must pay a required dividend but earnings make it unable to do so from its profits. Capital dividends may be a sign that a company is not financially healthy. In any case, they reduce the amount of capital that the company has to invest in its operations. They are also called return of capital.

return of capital

References in periodicals archive ?
If a corporation purchases its stock back from a shareholder, and the transaction does not fit one of the listed circumstances, the distribution will be characterized as either a dividend, a return of capital or capital gain under Sec.
The return of capital does not constitute income, as there is no economic gain or accession to wealth.
This month's column summarizes three SOPs on investment company accounting for high-yield debt securities; income, capital gain and return of capital distributions; and foreign currency and another SOP that rescinds Accounting Principles Board statements.
This article summarizes the relevant rules for characterizing such damages or settlements as ordinary income, capital gain, nontaxable return of capital or fully taxable punitive damages.
shareholder's return of capital could be taxed as ordinary income.
301(c)(2), defines a return of capital as a distribution in excess of the distributing corporation's current and accumulated E&P.
In computing an "excess distribution," the entire amount of the distribution (regardless of whether it is a dividend, return of capital or capital gain) is included.