CVC is paying a special dividend of $10 this week. The dividend will be a return of capital, thus there is no tax consequence. But the stockholder's cost basis will be reduced by $10. My question is what is your new cost basis if you paid $8 for the stock?
>
>
>
>
>
>
>
Zero, but $2 per share would be taxable.
Not quite correct about "no tax consequence". That would only be true if the ROC is LESS than the current basis of the stock.
True, only if the cost basis is greater than the ROC payment. You can't reduce cost basis to less than zero.
$8 of the ROC payment will reduce the cost basis to zero. The other $2 is taxed as capital gain (even though you don't actually sell the stock). End result, there ARE tax consequences!
Thanks, everyone.
704set
Have something to add? Share your thoughts — no account required.
Ask the community — no account required