U.S.Tax Treatment of QUALCOMM Dividends..
Paid in 2003 and 2004
SAN DIEGO - PRNewswire-FirstCall - Dec. 28
SAN DIEGO, Dec. 28 /PRNewswire-FirstCall/ --
The primary purpose of this advisory is to inform stockholders that the U.S. federal tax treatment of the cash distribution (i.e., dividend) paid to the QUALCOMM's stockholders on December 26, 2003 has changed. Below is an explanation of this change and additional aspects of the Company's dividends in 2003 and 2004.
The tax treatment of the December 26, 2003 cash distribution was originally reported as a taxable dividend on IRS Form 1099-DIV, as required by U.S. tax rules.
It is no longer considered to be a taxable dividend as originally reported to stockholders.
After the close of the fiscal year that ended September 26, 2004 ("FY04"), the Company was able to determine that cash dividends paid to stockholders during FY04 (i.e., the dividends paid on December 26, 2003, March 26, 2004, June 25, 2004, and September 24, 2004) did NOT represent taxable dividends to stockholders because QUALCOMM did not have positive "earnings and profits" ("E&P") for tax purposes at the end of FY04.
Instead, the dividends paid in FY04 represented a tax-free return of each stockholder's investment (or "tax basis") in QUALCOMM stock. Stockholders may need to amend their 2003 calendar year income tax return if they reported the December 26, 2003 distribution as a taxable dividend.
If the amount of cash distributions paid to you was greater than the adjusted tax basis in the stock (this is not common), then a portion of the dividends paid to you may have represented a capital gain. Please check with a tax advisor, because distributions in excess of a stockholder's adjusted tax basis should be treated as a capital gain.
The two-for-one stock split of the Company's common stock was made in the form of a 100 percent stock dividend. The stock dividend was distributed on August 13, 2004 to stockholders of record on July 23, 2004. The stock dividend was not taxable to stockholders. It reduced the tax basis per share of your stock by one-half. An IRS Form 1099-DIV will NOT be issued for the stock split.
If you hold your stock in certificate form or through a Direct Registration Account at Computershare Investor Services (the Company's "transfer agent") and dividend checks were mailed to you, the transfer agent, will mail you no later than January 31, 2005 an IRS Form 1099-DIV reflecting the March 26, 2004, June 25, 2004, and September 24, 2004 distributions as being non-taxable distributions (Box 3). If you received a 1099-DIV for the 2003 calendar year, you will also receive a corrected 1099-DIV reflecting that all the dividends paid in calendar 2003, including the December 26, 2003 dividend, were non-taxable distributions.
If you hold your stock in street name (through a bank or broker) and dividends were deposited into your brokerage account, that institution will mail you an IRS Form 1099-DIV reflecting the March 26, 2004, June 25, 2004, and September 24, 2004 distributions as being non-taxable distributions (Box 3). You will also receive from your bank or broker a corrected IRS Form 1099-DIV for the 2003 calendar year reflecting that all dividends paid in calendar 2003, including the December 26, 2003 dividend, were non-taxable distributions.
We urge each stockholder to consult with his or her own tax advisor to determine their correct basis in QUALCOMM stock and the tax consequences of the distributions, including any state, local or foreign tax considerations.
For further information please contact, Investor Relations, Bill Davidson of QUALCOMM, +1-858-658-4813, ir@qualcomm.com.
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