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
- RadioShack: This Is Your Second Warning
- 3 Key Takeaways From General Electric Company's Earnings Report
- Domino's New Pizza Chicken Is Actually Great for the Company
- Fool's Gold Report: Gold Falls Below $1,300 as Stock-Market Fears Subside
- Total's Big Plans for Africa Will Provide Long-Term Growth
- What Do General Electric's Results Say About the Market's Future?