From this Morgan-Stanley 2024 tax guide: Reallocation of distributions: Return of capital redesignation
"A portion of the income dividends paid by certain Morgan Stanley Funds may have been redesignated as nontaxable return of capital. Your Form 1099-DIV for these funds reports the proper amount of “non-dividend distributions” for income tax purposes. If a return of capital was reported to you, an adjustment to the basis of your
shares will be necessary. Please consult your tax advisor for further information."
I interpret that to mean that Morgan Stanley does not reduce your cost basis for these distributions, and it's up to you to adjust your basis. Since you sold the stock this year, you would adjust your original cost basis by the distributions made over the time you owned the stock. I don't see how the non-dividend distribution, if you reported it correctly in box 3 of your 1099-DIV, would generate any kind of error, but if it does, you could remove that entry as long as you correctly report your basis.
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