capital return - how does it work?, page-3

HT1. This is how it works, did not have one for a while, but i think the same applies. I think i got some back from WES a few years back.

EXAMPLE ONE.

Say Horse purchased 10,000 OZL shares in December 2008. He paid $10,000 ($1.00 per share) I will exclude brokerage for simplicity, your cost base $10,000.

Capital return 12c per share.
Horse will receive a total of $1,200 (10,000 x $0.12)capital return.

You will have to adjust the cost base and reduced cost base of your OZL shares by subtracting the amount of the capital return. The new cost base $8,800 ($10,000 - $1200), or $0.88 per share.

You did not make a capital gain on these shares as a result of the capital return.

EXAMPLE 2

Say Horse purchased 100,000 OZL shares in December 2002. He paid $10,000 ($0.10 per share) I will exclude brokerage for simplicity, your cost base $10,000.

Capital return 12c per share.
Horse will receive a total of $12,000 (100,000 x $0.12)capital return.

You will have to adjust the cost base and reduced cost base of your OZL shares by subtracting the amount of the capital return. The new cost base $NIL ($10,000 - $12,000), or $NIL per share.

You did make a capital gain of $2,000 ($12,000-$10,000)on these shares as a result of the capital return.

Your CGT = $2,000 for the year, less 50% discount = $1,000.

You cost base for these shares in no longer $0.10c, but NIL.

Hope it's crystal clear.