Hello,

I bought stock in a company in June 2009. In Oct 2011, that company paid out dividends equal to the its current stock price times the number of shares I had, e.g. 200 shares * $1.04/share = $208. At that time there stock price reduced to $0.134/share. On Oct 2012, that company gave me a return of capital of $60. Currently, I have 200 shares in the company at a share price of $0.018/share. The 2012 1099-DIV shows the $60 as a non dividend distribution.

Tax-wise, what am I suppose to do with the $60 non dividend distribution? I did some research an found that the non dividend distribution reduces the bases of the stock. How do I compute the basis?

Steven

Steven,

You should keep the information about the $60 return of capital. Because it DOES reduce the basis for the stock, but that does not come into play until you SELL the stock.

Ok. What if the return of capital is more than the cost basis? Say I bought the stock for $100 and they returned $120. Wouldn't I have to pay taxes on the $20 even if I haven't sold the stock yet?

I did a little more research and came to the conclusion that dividends don't reduce the cost basis. I am thinking that the current cost basis for the stock is equal to what I paid for the stock + commissions - $60. Is that correct?

Steven

That sounds accurate.