All distributions that are not dividends are a return of capital and decrease the shareholder's basis.

Question

Quizplus · Accepted Answer

Not all distributions that are not dividends are considered a return of capital. Some distributions may be considered as capital gains, interest, or other forms of income depending on the nature of the distribution and the entity distributing it. A return of capital specifically refers to distributions that are not considered income and are instead a return of the shareholder's original investment, which then decrease the shareholder's basis.

All Distributions That Are Not Dividends Are a Return of Capital