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#3
04-25-2006, 11:49 AM
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 Re: Stock Cost Basis "Herb Smith" <smithff33[at]aol.com> wrote: - quote - > 704set wrote:
Thanks, everyone.> > CVC is paying a special dividend of $10 this week. The > > dividend will be a return of capital, thus there is no tax > > consequence. > Not quite correct about "no tax consequence". That would > only be true if the ROC is LESS than the current basis of > the stock. > > But the stockholder's cost basis will be > > reduced by $10. > True, only if the cost basis is greater than the ROC > payment. You can't reduce cost basis to less than zero. > > My question is what is your new cost basis if you paid $8 > > for the stock? > $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! 704set << ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== > |
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#2
04-24-2006, 07:33 PM
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| Re: Stock Cost Basis 704set wrote: - quote - > CVC is paying a special dividend of $10 this week. The
Not quite correct about "no tax consequence". That would> dividend will be a return of capital, thus there is no tax > consequence. only be true if the ROC is LESS than the current basis of the stock. - quote - > But the stockholder's cost basis will be
True, only if the cost basis is greater than the ROC> reduced by $10. payment. You can't reduce cost basis to less than zero. - quote - > My question is what is your new cost basis if you paid $8
$8 of the ROC payment will reduce the cost basis to zero.> for the stock? The other $2 is taxed as capital gain (even though you don't actually sell the stock). End result, there ARE tax consequences! << ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== > |
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#1
04-24-2006, 07:33 PM
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| Re: Stock Cost Basis 704set wrote: - quote - > CVC is paying a special dividend of $10 this week. The
Zero, but $2 per share would be taxable.> 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? http://news.moneycentral.msn.com/tic...407&ID=5631020 << ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== > |
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04-24-2006, 07:14 PM
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| Re: Stock Cost Basis "704set" <704set[at]anywhereyouwant.com> writes: - quote - > CVC is paying a special dividend of $10 this week. The
Not quite -- see below!> dividend will be a return of capital, thus there is no tax > consequence. - quote - > But the stockholder's cost basis will be
Only if the basis is at least $10> reduced by $10. - quote - > My question is what is your new cost basis if you paid $8 for the stock?
Basis can only be reduced to zero. After all, return ofcapital distributions become taxable as capital gain (long or short, depending how long you've held the underlying shares). So in the case you give, the $10 ROC distribution reduces the basis from $8 to zero and creates $2 of capital gain. Future ROC distributions will be wholly taxable, since basis is now zero. -- Rich Carreiro rlcarr[at]animato.arlington.ma.us << ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== > |
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#-1
04-24-2006, 03:14 PM
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| Stock Cost Basis 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? 704set << ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== > |
| Tags |
| basis, cost, stock |
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