What is a nondividend distribution?

A nondividend distribution is a payment made by a corporation to its shareholders that is not classified as a dividend. This type of distribution is typically a return of capital, a distribution of capital gains, or a distribution of property. Nondividend distributions are not subject to the same tax treatment as dividends and are generally considered a return of the shareholder's investment in the company.

Nondividend distributions can have tax implications for shareholders, as they may be treated as a reduction in the shareholder's basis in the stock of the company. This can affect the amount of gain or loss that a shareholder recognizes when they sell their shares in the future.

Nondividend distributions are usually made when a company has excess cash or assets that it wants to return to shareholders. These distributions can be a way for a company to reward its shareholders without incurring tax liabilities for the company or the shareholders.

It is important for shareholders to consult with a tax advisor or financial professional to understand the implications of a nondividend distribution on their individual tax situation.