Balance Sheet
Return of Capital (ROC)
A distribution that is not paid from a company’s earnings and profits; instead it is treated as a return of the investor’s invested principal for tax purposes and typically reduces cost basis.
Why it matters
ROC can materially change after-tax outcomes for preferred holders: ROC generally reduces your cost basis and defers taxes until you sell (or until basis reaches zero), rather than being taxed immediately as ordinary dividend income.
How we calculate or source it
Classification is determined by the issuer and reported to brokers/investors (commonly on Form 1099‑DIV, Box 3 in the U.S.). Treatment depends on jurisdiction and the investor’s specific tax situation.