Return of capital

How does a return of capital transaction affect the cost
(or basis) of stock? It appears to me that it does not
have an effect on the basis and that is not how the IRS
treats the transaction.

Thank you.

via_newsgroup
Sat Aug 16 15:29:31 CDT 2003

In microsoft.public.money, Paul wrote:

>How does a return of capital transaction affect the cost
>(or basis) of stock? It appears to me that it does not
>have an effect on the basis and that is not how the IRS
>treats the transaction.

A return of capital transaction reduces the basis. If you enter a
later Sell and do Taxes->ExportToTaxCut (regardless of what tax
program, if any, you are using), the basis is reduced. You can
produce .txf files or print a report. This is the most important one
IMHO.

In the Portfolio views if you display the Cost Basis column, the
basis is properly reduced.

If you go to Taxes->CapitalGainsEstimator->EstimateCapitalGainsTax,
the basis is NOT reduced, unfortunately. :-(

If you were to enter a negative return of capital, things really get
strange. There is no warning, but the effect is the same as entering
a positive return of capital. :-(

I just re-checked on Money 2004.