Nontaxable Distributions

Nontaxable distributions are a return of the shareholder's capital (original investment), generally made because an excess amount of capital has been accumulated by the corporation. Nontaxable distributions may be received in cash or reinvested at the shareholder's request to acquire additional shares. The basis (usually the cost) of the stock must be reduced by the amount of the distribution. Amounts received are not taxable until the remaining basis is reduced to zero.