Any club that owns/owned QCOM in 2003 needs to read this.

 

QCOM has announced that the first three dividend distributions it made in 2003 are a return of capital and not qualified dividends as originally reported. The December 26 distribution can tentatively be considered to be a qualifying dividend (subject to holding period rules), but may be reclassified as a return of capital sometime after September 30, 2004.

 

Expect revised 1099-DIVs from your brokerage.

 

The reason for these changes are as follows:

 

Many companies find it desirable to provide a steady distribution of funds to investors. However, "dividends" can only be paid out of earnings. If there aren't sufficient earnings to cover the payout, the balance consists of the company giving you back your investment. If you receive more than your cost basis in a series of return of capital transactions, the excess is a capital gain.

 

Status of the December 26, 2003 distribution won't be determinable until such time as QCOM knows whether it is profitable or not.

 

Another justification for NAIC guidelines to invest only in profitable companies.

 

Ira Smilovitz