Two Harbors Investment Corp. Announces Tax Basis Information for the Distribution of Silver Bay Realty Trust Corp. Common Stock
April 29, 2013 7:28 AM EDT
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NEW YORK--(BUSINESS WIRE)-- Two Harbors Investment Corp. (NYSE: TWO; NYSE MKT: TWO.WS) today announced information concerning the special dividend distribution of Silver Bay Realty Trust Corp. (“Silver Bay”) common stock. On April 24, 2013, the company distributed (the “Distribution”) on a pro rata basis its shares of Silver Bay common stock to the Two Harbors’ stockholders of record as of the close of business on April 2, 2013 (the “Record Date”). Based on the shares outstanding on the Record Date, stockholders were entitled to receive 0.048825853 shares of Silver Bay common stock for each share of Two Harbors common stock held on that date.
Tax Treatment of the Distribution
Two Harbors intends to report the Distribution of Silver Bay common stock as a dividend distribution for U.S. federal income tax purposes. Stockholders will be treated as receiving a dividend distribution equal to the fair market value of the Silver Bay common stock (and cash in lieu of fractional shares of such common stock) received in the Distribution and will take an adjusted basis, for federal income tax purposes, in such shares equal to the “fair market value” of such shares based on the market price on the date of the Distribution. For federal income tax purposes, the fair market value of the Silver Bay common stock is the closing price on April 24, 2013, which was $19.40 per share.
The company intends to distribute cash in 2013 that is equal to its current and accumulated earnings and profits through December 31, 2013 (which includes the company’s annual 2013 taxable income), in addition to the distribution of Silver Bay common stock. We expect that the cumulative quarterly 2013 distributions of cash and Silver Bay common stock that are in excess of the current and accumulated earnings and profit will be treated as a “nondividend distribution” for U.S. federal income tax purposes, which will have the effect of reducing the basis of a stockholder’s shares of Two Harbors common stock. If a stockholder has fully recovered his, her or its basis in their Two Harbors common stock, a nondividend distribution may be treated as a capital gain.
We expect that each quarterly distribution during 2013 will be characterized for tax purposes as having the same percentage allocation that is designated as ordinary, capital gain, and nondividend distribution. The percentage allocation is based on the total cash and the fair market value of property distributed relative to the annual 2013 taxable income. Therefore, the nondividend distribution component will be allocated on a Form 1099 for federal income tax purposes to each dividend paid during 2013.
Consult Your Tax Advisor
The tax laws require stockholders to retain records with respect to the Distribution, including information regarding the amount, basis and fair market value relating to the Silver Bay common stock distributed. Stockholders may have additional reporting obligations to the Internal Revenue Service and/or other tax authorities.
The U.S. federal income tax treatment of holding Two Harbors common stock to any particular stockholder will depend on the stockholder’s particular tax circumstances. You are urged to consult your tax advisor regarding the U.S. federal, state, local and foreign income and other tax consequences to you, in light of your particular investment or tax circumstances, of acquiring, holding and disposing of Two Harbors common stock.
Two Harbors Investment Corp.
Two Harbors Investment Corp., a Maryland corporation, is a real estate investment trust that invests in residential mortgage-backed securities, residential mortgage loans and other financial assets. Two Harbors is headquartered in Minnetonka, Minnesota, and is externally managed and advised by PRCM Advisers LLC, a wholly-owned subsidiary of Pine River Capital Management L.P. Additional information is available at www.twoharborsinvestment.com.
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