The basis of all shares owned is reduced by the nondividend distributions as follows. The nondividend distribution is based on the number of shares you own when it occurs. Based on that you should be dividing the total distribution by all shares owned at the time and reduce the cost of each share by that amount. When you sell one 'block of shares' reduce the cost basis by the amount per share calculated.
- For example, if you originally paid $100/share for 100 shares , the cost basis of all the shares is $1,000. If you get a $5/share principal payment (return of capital, also referred to as nondividend distributions), instead of having a cost basis for the 100 shares of $1,000, you now have a cost basis of $500 ($1,000 original cost basis minus $500, which is 100 shares times the $5 per share nondividend distribution).
@RonR11
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