[GNC] Return of capital, lots & accurate gains

[Michael or Penny Novack]

On 3/30/2025 3:16 PM, Kalpesh Patel wrote:
>
> I was under the understanding that the effect of return of capital (RoC) is that the capital gains get postponed until when you sell the commodity, and that the cost basis gets reduced by it when RoC is distributed.
>
> In the States, the financial servicer should not be sending a dividend statement, and re-characterize it as a RoC at another time - they are two different things and are treated differently for the tax purposes.
>
> I normally go back to the original purchase transaction and readjust the cost basis for them. It does become a bit cumber some if multiple lots are involved but I believe that is the correct treatment of it. I welcome weigh in from pro's than I am.

Correct ---- You debit cash (for the check received) and credit the 
basis. LATER (when eventually sold) will affect capital gains since you 
subtract the (remaining) basis from the sale price.

However -- terminology can be historic, so a return of capital 
distribution is still called a "dividend". Perhaps because at the 
corporate level the same rules apply? << becomes a liability when 
declared by the BOD, that is almost certainly well before the date when 
to be paid out.>>

Michael D Novack