hi guys, I am thinking about investing in REITs - I read and I think I understand the tax implications associated with REITs as follows;
- REITs dividends are ordinary dividends (as opposed to regular stock dividends treated as capital gains)
- return of capital from REITs are declared as capital gains
- cost basis is recomputed / adjusted by subtracting the return of capital per share from the original/previous cost basis
I have read from online that REIT stockhoders used to be responsible for computing the cost basis, but new SEC rules provided that brokerages are now responsible to inform the stockholders the cost basis values whenever it is changed - is that true in your experiences? does the brokerage send an email, AND/or will the new cost basis reflect on your account online?
Also, will the REITs eturn on capital be reflected on the same 1099-DIV statement that shows the dividends we receive from the stocks?
Finally, I read that Turbo Tax Premier software can help with those who sold long term stocks, and should also help with handling these REIT tax reporting accurately? I 've only used Turbo Tax Delue version so far I am thinking about going long term with this stock (maybe at least a year or two).
Am kindly requesting the seasoned investors to review and see if I am misinterpreting and/ or missing any tax implications related to REITs. Your inputs are very much appreciated!
TWO does not have ROC (return of capital) as any portion of their dividends. However, part of the dividends are capital gains, and the rest is ordinary dividends.
I don't know where you cut & pasted your information, but it is not entirely correct. You don't have to keep track of your basis other than what you originally paid for the shares. I don't know of any REIT that pays ROC. There may be some, but I am not aware of any.
You are pretty much correct except for one major item. A partial return on capital that is part of your quarterly dividend is not taxed as a capital gain. This is a return of your own invested monies in the company and is not taxed at all. It is all broken out in your end of year statement from the brokerage house that you are using.
I do not know about the turb-tax question as I use an accountant to do mine. Hope this was of some help.
thank you so much RunningFraz .... and you are so right about the "return fof capital" - just realized belatedly that this should not be taxed at all (its called "return" after all lol) . Very much appreciate your correction.