Hi Ken, According to Pub 17 page 67 "A return of capital is a distribution that is not paid out of the earning or profits of a corporation. It is a return of your investment in the stock of the company." It is reported to you on a Form 1099-DIV in box 3. A return of capital reduces the basis of your stock. "It is not taxed until your basis in the stock is fully recovered." After that report any additional return as capital gains. You can get a copy of this info from www.irs.gov. Ask for Pub 17 then scan through to page 67. Print it out if you like. Hope this helps, Jack
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