[shall890]

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

[AtlantaTaxExpert]

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.

[shall890]

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

[AtlantaTaxExpert]

That sounds accurate.