I've been looking at my CODI Sched K-1 to assess how I'm really doing with my CODI investment. I think it's doing good - I would like to bounce this off my fellow long-term investors and get your opinions as well. I am not a tax professional, I'm just an average guy trying to figure this out.
My approach is to do all my analysis on a per-share basis. Since I reinvest the quarterly distributions, I divided the total income received by the average number of shares I held over the year - this should explain the few cents per share difference you might see if you run your own numbers.
First looking at Part II, Section L - it looks like the current year capital distributions (the $1.44 per share distributed) is more than offset by the current year capital increase. That's nice.
The Part III Partners share of Income, Deductions, etc. gives us the tax impact of being a partner in CODI. I see that I pay $0.58 per share in federal income taxes:
Interest Income $0.90 / share (K1 line 4). This gets reported on Sched B, and taxed at 28%, for a cost of 0.25 / share
Qualified dividends $1.13 / share (K1 line 6b), Form 1040, taxed at 15%, for a cost of 0.17 / share
Net Long Term Gains of $0.56 / share (K1, line 9a). Sched D, taxed at 28%, for a cost of 0.16 / share
On the Deduction side, a CODI shareholder can deduct:
Investment Interest Expense $0.56 / share For me this is not deductable
misc deduction (K1 line 13 (K)) $0.50 / share. Including this on Sched A reduces ny tax bill by ).14 /share
Considering the taxable income I need to report and the deduction that ownership gives me, COD cost me $0.42 / share to own last year. For that 42 cents, I got a capital increase of $1.52 / share. I'm thinking CODI shareholders did well last year.
Some caveats and misc thoughts:
You should ask a real pro (and tell me what they say).
State and city income taxes will only make the cost of ownership higher.
The quarterly capital distributions seem to affect cost basis