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For the special dividend that Corrections Corporation of America (CXW) recently distributed, how is that calculated, since it's not just an ordinary dividend (of cash payment, vs paid in shares, in this case)?

On their website, they have a press release ( stating that the price was 38.90 per share. How do we account for this? Do we treat it as another purchase and assign a cost basis to it (38.90)?

I took the number of shares I owned times 6.63 (obtained from, then divided that by 38.90 to get the number of new shares I received (which matches my account), then took the remainder times 38.90. While this was close, it did not exactly match what my account shows.

First, you calculate the value of the dividend you received, which is the amount of cash you could have received if you elected to take the entire special dividend in cash. This would be the cash you received plus the number of shares you received * $38.90.

Then you record a purchase of the number of shares you received at a cost of $38.90/share. The holding period for the new shares begins the day after you received the dividend.

Finally, note that this was probably an "extraordinary" (a specific term of art) dividend for you. That is, the dividend was greater than 10% of your adjusted cost basis in the original CCA shares. This triggers special rules should you sell those shares at a loss. Any loss will automatically be treated as long-term regardless of holding period.

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