In accordance with Internal Revenue Code Section 6045B, an issuer of a specified security is required to report certain organizational actions which effect the basis of that security. Altus Midstream Company (ALTM) is providing a copy of IRS Form 8937, Report of Organizational Actions Affecting Basis of Securities, reporting certain information that affects a shareholder’s or their nominee’s tax basis in ALTM shares. The following information is not intended to provide legal or tax advice. Investors in ALTM shares should consult with their tax advisor regarding the impact of the information provided.
Cash distributions (i.e., dividends) paid by a corporation to its shareholders on account of their stock ownership in the company are typically considered taxable to the shareholder to the extent paid out of the company’s current or accumulated earnings and profits. Earnings and profits are generally considered as the measure for determining a company’s economic ability to pay dividends to its shareholders.
Return of Capital
Any portion of a cash distribution made by a corporation on account of its shares that exceeds the corporation’s current or accumulated earnings and profits is considered a return of capital to the shareholder. This portion is merely a return of a previous amount that was contributed, and it reduces a shareholder’s tax basis in shares held in the company. A return of capital distribution may be considered nontaxable to the shareholder to the extent the shareholder has sufficient tax basis in the shares. Final return of capital and taxable dividend amounts will be reported to shareholders on Form 1099-DIV each tax year.