Nontaxable Distribution

AAA

DEFINITION of 'Nontaxable Distribution'

A type of dividend that is paid to shareholders of a corporation not as a result of earnings, but as a return of capital. Nontaxable distributions can also include stock received from a spinoff. Dividends paid to cash-value life insurance policyholders are also considered nontaxable returns of capital.

INVESTOPEDIA EXPLAINS 'Nontaxable Distribution'

Shareholders who receive nontaxable distributions must reduce the basis in their stock accordingly. Upon the sale of the stock, the resultant gain or loss will be calculated from the adjusted basis. Nontaxable distributions are generally reported in box 3 of the Form 1099-DIV.

RELATED TERMS
  1. Qualified Retirement Plan

    A plan that meets requirements of the Internal Revenue Code and ...
  2. Taxes

    An involuntary fee levied on corporations or individuals that ...
  3. Adjusted Basis

    The proportionate value of an asset or security that reflects ...
  4. Distribution

    1. When trading volume is higher than that of the previous day ...
  5. Spinoff

    The creation of an independent company through the sale or distribution ...
  6. Record Date

    The cut-off date established by a company in order to determine ...
RELATED FAQS
  1. How do dividend distributions affect additional paid in capital?

    Whether a dividend distribution has any effect on additional paid-in capital depends solely on what type of dividend is issued: ... Read Full Answer >>
  2. When does the holding period on a stock dividend start?

    The holding period on a stock dividend typically begins the day after it is purchased. Understanding the holding period is ... Read Full Answer >>
  3. What kind of companies in the utilities sector offer the most stable dividends for ...

    Among the companies that offer the most stable dividends for risk-averse investors are large, solidly established U.S.-based ... Read Full Answer >>
  4. What average annual total return does the utilities sector generate?

    Due to their highly stable earnings and cash flows, utilities companies are popular among investors interested in dividend ... Read Full Answer >>
  5. Why is the utilities sector popular among value investors?

    The utilities sector is popular among value investors due to the dividends paid by utility companies as well as the traditionally ... Read Full Answer >>
  6. What is the long-term outlook of the utilities sector?

    The long-term outlook for the utilities sector is much the same as it has always been; utilities continue to be regarded ... Read Full Answer >>
Related Articles
  1. Taxes

    Tax Treatment Of Roth IRA Distributions

    Learn the requirements for withdrawing funds tax and penalty free.
  2. Taxes

    Distribution Rules For Inherited Retirement Plan Assets

    If you've recently inherited a retirement plan, you must get to know the rules for distributing the funds.
  3. Retirement

    3 Deadlines For Retirement Plan Beneficiaries

    To take full advantage of new RMD regulations, beneficiaries need to take action before important deadlines.
  4. Budgeting

    Managing Income During Retirement

    Learn some sensible strategies for making your hard-earned savings last for as long as you need them.
  5. Retirement

    Roth Vs. Traditional IRA: Which Is Right For You?

    To answer this question, you need to consider several of the factors we outline here.
  6. Trading Strategies

    Microsoft's Game of Catch-Up With The Dow

    Microsoft (MSFT) underperformed the Dow Jones Industrial Average during the 2002 to 2007 bull market, but it has played catch-up in recent years.
  7. Fundamental Analysis

    American Express Returns Vs. DJ Industrial Average

    American Express has handily outperformed the Dow Jones Industrial Average since 2009, but unusual weakness in the last year is taking its toll.
  8. Professionals

    The Most Popular ETFs with Financial Advisors

    Financial advisors might continue to perform well by holding these popular ETFs, but time is limited.
  9. Mutual Funds & ETFs

    ETF Analysis: iShares Barclays 20+ Year Treasury Bond

    Learn about the iShares 20+ Year Treasury Bond ETF (TLT). TLT is a very liquid ETF with low costs that allow investors to gain exposure to treasuries.
  10. Investing

    Looking for Alternatives to Invest in Real Estate?

    There are several ways to invest in “real estate” via the stock market, buying stocks and hold them for years. We give you 5 ways to invest in real estate.

You May Also Like

Hot Definitions
  1. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  2. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  3. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  4. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  5. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  6. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!