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Newcastle Investment Corp. Message Board

  • mysonchino mysonchino Apr 30, 2013 4:40 PM Flag

    Word from Brokerage firm on tax status

    I use Raymond James and asked them to provide me information as to the tax status of the spin off. They emailed me papers from "the prospectus or source document".-----" Dividend or capital change announcement" There were 2 line items on the 2 pages emailed. Both read Tax Status---non taxable event. Since tomorrow is the last day NCT can be sold before the X date for the spin off and there has been no huge volume bailing out and the price has been climbing until today when it pulled back a little, and the management of the company has millions of their own money invested, I tend to believe this will be a non taxable event.

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    • NCT already stated that it would be a taxable spin-off. How this works is unknown to me. I tried frinding comparable examples via Google searches, but I had no luck. We may have to wait until we receive the next 1099-div to see how much is ROC and how cost basis is adjusted. With roughtly 50% equity in each NCT and NRZ, common sense tells me that there much be some cost-basis adjustment. (Some people will have tax liabilities if their cost basis goes negative.) That's the kind of detail I'm looking for. They cannot give exact numbers this early, but they may be able to provide "example numbers" in this Friday's CC.

      Too bad they cannot make this a tax-free spin off. Then my cost basis in both NCT and NRZ simply get cut in half. (There are plenty of those examples in cyber space.)

      • 2 Replies to waynesonnen
      • I believe that you are incorrect. Whatever the tax treatment of the dividend, the cost adjusted basis depends on what percentage of the assets of NCT get placed into NRZ. It is not a 50-50 split unless the assets are split evenly. The whole situation was poorly planned ( for shareholders ) and I sold all shares Monday to get out of having to deal with the potential tax mess. I plan to look again May 16 to see what the situation looks like. Only own what you understand.

      • FYI: This from the spin-off presentation.

        Newcastle’s distributions (of cash and stock) in any year are taxable to taxable shareholders to the extent of Newcastle’s earnings and profits for the year. The distribution of New Residential stock will contribute to Newcastle’s earnings and profits to the extent that the value of the shares distributed exceeds Newcastle’s tax basis in the New Residential assets. Any amount distributed in excess of earnings and profits is first allocated to return of capital to the extent of a shareholder’s basis and then to capital gain. Please refer to the Form 10 for more information and consult your tax advisor.

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