I have up until now held all my DNP shares in deferred accounts. I am about to retire and some of those shares will move to taxabe accounts. My question is with the part of the distribution that is returrn of capital. Do you guys pay taxes on the ROC or does that reduce you cost basis when/if you sell the shares.
ROC is a return of your money in a taxable account, so it is not a taxable item. You reduce your cost basis by the ROC amont and is picked up as a taxable amount when/if you sett the shares. If you don't sell the shares and pass them on to your heirs the cost basis is stepped up to the market value on the date of your passing with no tax due.
Well, yes, but perhaps you should also seek tax advice. I think I remember that once all of your capital has been returned (for retirees that might not happen) you may need to pay some tax on each part of the dividend. Exactly how moving the shares from a deferred account to a taxable account may affect your tax is another point to consult with an expert.