Return of Capital

Return of Capital (ROC) refers to payments made to investors that represent a return of their original investment rather than profit or income. It often occurs in investment accounts, like mutual funds or real estate. Instead of receiving dividends from earnings, investors get back some of their own funds. While this can provide immediate cash flow, it can also reduce the total invested amount. Importantly, ROC is typically not taxed as income, but it can affect the cost basis of the investment. Understanding ROC is essential for investors to assess the true performance of their investments.