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This is considered a "nontaxable distribution" and/or "return of capital/principal" depending on the facts and circumstances. Read further.
The cost basis does apply here. A return of capital is a return of some or all of your investment in the stock of the company and reduces the basis of your stock asset but is not a taxable event until your basis in the stock goes to zero, at which point it becomes a capital gain.
There appears to be mistake here. $100/share x 100 shares results in a cost basis of $10,000, not $1000. Am I missing something?
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