What Is Return of Capital?
Return of capital is a distribution to investors that represents giving back part of their original invested capital, rather than paying out taxable profit or income.
Why it matters
ROC distributions aren't immediately taxed as income the way a dividend is — instead they reduce the investor's cost basis, which can mean a larger taxable gain later when the investment is sold.
Related Terms
More Investing Terms
This definition is provided for general educational purposes and is not financial, legal, tax, or real estate advice. Verify important decisions with appropriately qualified professionals.
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