Dividend Tax Treatment and Return of Capital Basis Adjustments
Dividend Distribution U.S. Tax Treatment and
Return of Capital (ROC) Basis Adjustments
A portion of Medtronic’s dividends paid following the completion of the Covidien acquisition, starting with the dividend distribution paid on April 17, 2015, and ending with the dividend distribution paid April 16, 2016, were treated for U.S. tax purposes as a return of capital (ROC) instead of a distribution of earnings. Under applicable U.S. tax rules, dividend distributions treated as a ROC reduce a shareholder’s tax basis in the shares held, while dividend distributions treated as a distribution of earnings are characterized as ordinary income. The final determination of the portion of any particular dividend distribution treated as a ROC versus a distribution of earnings is reported by Medtronic on IRS Form 8937. Copies of Medtronic’s Form 8937 filings are posted to this page, below.
The following table summarizes the Medtronic plc dividend distribution U.S. tax treatment for all dividends paid between April 17, 2015 and April 16, 2016. For complete information, please see the Form 8937s below. For questions regarding your specific situation, you should consult your tax and/or financial advisor.
|U.S. Tax Treatment|
|Dividend Distribution Record Date||Dividend Distribution Payment Date||Distribution of Earnings Percentage||ROC Percentage||ROC Basis Adjustment per Share||ROC Adjusted Basis per Share*|
Original Basis at Exchange
Please note, the dividend paid on January 15, 2015 was paid by Medtronic, Inc. and was a distribution of earnings. The above table assumes the Medtronic plc shareholder held Medtronic, Inc. shares purchased before the close of the Covidien acquisition, which occurred prior to the NYSE market open on January 26, 2015. The transaction close basis was $76.95 which reflects the Medtronic, Inc. closing share price from Friday, January 23, 2015. Any Medtronic plc shares owned as of the close of the Covidien acquisition on January 26, 2015 and sold after the March 24, 2016 record date should use $75.67 as their adjusted basis. This takes into account all ROC basis adjustments in the holding period from January 26, 2015 through March 24, 2016. Any shares purchased on or after January 26, 2015 and sold before the March 24, 2016 record date should adjust their basis for ROC only for the dividend periods that apply (if any). Any shares purchased after the March 24, 2016 record date do not require a ROC adjustment.
Medtronic plc has determined that all of the dividend distributions paid on and after July 27, 2016 will be treated as a distribution of earnings; none is considered a return of capital. Therefore, Form 8937 will no longer be filed unless a distribution is determined to include a return of capital. Based on available earnings and profits at Medtronic plc, we do not anticipate that another Form 8937 will be filed in the near future.
The above discussion is intended to be general information and may not apply to all U.S. shareholders. For questions regarding your specific situation, you should consult your tax and/or financial advisor.