Technically you are a partner. You need to report your share of the entire operation's income, deductions, credits etc. on your personal taxes in accordance with the Sched K-1 they provide you with.
Back in November 2014 there was news that CODI was offering 6M new shares ... did those new shares get absorbed by the market, and become part pf the current market cap, or are they still sitting on the sidelines?
Alan Offenberg mentioned dividends near the end of his remarks at the start of the most recent conference call. I think what he was saying is that the $0.36 quarterly distribution is now below the CODI cash flow level since selling almost half of Fox. Paying the current distribution makes sense because they got the proceeds from the sale AND the Fox they have left is valued at more than they paid for all of Fox originally. But, if we really were to get them to make a distribution to us, CODI wouldn't have the wherewithal to go get a replacement for that lost income stream.
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
It's a good question. But looking at the most recent form 10K annual report (March 2013) I'm struck by a couple of things.
Under Risk Factors, they make a point that their businesses generate earnings and cash flow, which allow them to give CODI interest and principal payments to CODI. "We will rely entirely on receipts from our businesses to make distributions to our shareholders. The Trust’s sole asset is its interest in the Company, which holds controlling interests in our businesses. Therefore, we are dependent upon the ability of our businesses to generate earnings and cash flow and distribute them to us in the form of interest and principal payments on indebtedness and, from time to time, dividends on equity to enable us, first, to satisfy our financial obligations and, second to make distributions to our shareholders. "
Cash Avail for Distribution (CAD) - see page 128. It seems to be working.
CAD sounds good. But can someone explain the difference between that positive number, and the minus 71 cents EPS (ttm) that Yahoo Finance reports in the CODI summary?