Callon Preferred, return of captial?

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rtaber
Posts: 5
Joined: Mon Jan 17, 2011 12:58 pm

Callon Preferred, return of captial?

Post by rtaber »

Dan, is the Callon Preferred dividend a return of capital?''

Thanks...
dan_s
Posts: 34757
Joined: Fri Apr 23, 2010 8:22 am

Re: Callon Preferred, return of captial?

Post by dan_s »

The tax treatment of dividends (common or preferred) cannot be known for certain until the company's tax return is completed. If a company has current earnings & profits for Federal income tax the dividends are taxable. If the company has a current year loss, but has accumulated earnings & profits deficit, then the dividends are taxable. If the company has a current year loss and an accumulated E&P deficit then the dividends are return of capital.

NOTE that we are talking about income tax numbers above, not what is reported under GAAP accounting. Since upstream companies can deduct their intangible drilling costs ("IDC"), then most of them have losses for tax purposes, especially small-caps that do a lot of drilling.

I am 99.9% sure the dividends on CPE preferred stock will be return of capital this year and for several years to come.
Dan Steffens
Energy Prospectus Group
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