Return of capital
Return of capital. The dividend payment received from certain companies is a return of capital in whole or in part rather than a share of profits. The return of capital portion of the payment is free from income tax but reduces your cost basis. Hence, you eventually pay income taxes at capital gains rates when you sell the shares.
Related Fool Articles
- [link link title]
Recent Mentions on Fool.com
- MetLife Inc's Earnings Results: 4 Key Takeaways
- The Allstate Corporation's Earnings Results: 3 Key Takeaways
- A Halloween Treat for Tesla Motors Inc. and Electric Vehicle Proponents
- 5 Things Garmin Ltd.'s Management Wants You to Know
- 3 Scary Stocks to Avoid
- Danger Lurking in Mosaic Stock's Dividend Payout Ratio?