Dear NG: I've re-invested the monthly dividends from a mutual fund which, according to my 1099 DIV, turned out to be partly Nondividend Distributions.
Am I correct in my assumptions that since I've re-invested the dividend/nondividend distribution that it does NOT reduce my basis? ANd dhd I NOT re-invested, then myasis would be reduced by the nondividend distribution?
Thanks in advance for any insights.
-Kevin
Reinvestment of the dividend portion of the distributions did increase your basis.
The non-dividend portion did decrease your basis but you increased it again by the same amount by reinvesting the non-dividend portion. It's a wash.
The net effect is your basis (from before the distributions) increased by the dividend portion of those distributions.
It doesn't matter whether you reinvest or not, distributions don't affect the cost basis of your original shares.
When you reinvest, you increase the cost basis of your entire holding. As far as taxes are concerned, reinvesting is the same as receiving a check and purchasing shares on the same date as the distribution. Since you now own more shares, the cost of the shares (which is the same as your distribution) is added to your total cost basis.
I agree, although there's the unlikely scenario that the non-dividend distribution exceeded the original basis. In that case, the excess would become capital gain.
Steve
Strongly disagree.
Steve
That's not true. Return of capital distributions absolutely
*do* reduce your basis by the amount of the distribution.-- Rich Carreiro snipped-for-privacy@rlcarr.com
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