LOS ANGELES--(BUSINESS WIRE)--January 28, 2026--
Source Capital $(SOR)$ (the "Fund") announced today the U.S. federal income tax treatment of its 2025 dividends and a $2.50739554 deemed distribution to shareholders of record as of December 31, 2025.
Federal Tax Treatment of 2025 Dividends
Long-Term
Record Payable Amount Paid Ordinary Income Capital Gain
Date Date Per Share Dividends (1) Distributions
----------- ----------- ----------- --------------- ----------------
1/17/2025 1/31/2025 $0.208300 $0.149872 $0.058428
2/14/2025 2/28/2025 0.208300 0.149872 0.058428
3/14/2025 3/31/2025 0.208300 0.149872 0.058428
4/16/2025 4/30/2025 0.208300 0.149872 0.058428
5/15/2025 5/30/2025 0.208300 0.149872 0.058428
6/17/2025 6/30/2025 0.208300 0.149872 0.058428
7/16/2025 7/31/2025 0.208300 0.149872 0.058428
8/14/2025 8/29/2025 0.208300 0.149872 0.058428
9/17/2025 9/30/2025 0.208300 0.149872 0.058428
10/16/2025 10/31/2025 0.208300 0.149872 0.058428
11/14/2025 11/28/2025 0.208300 0.149872 0.058428
12/16/2025 12/30/2025 0.208300 0.149872 0.058428
----------- --------------- ----------------
$2.499600 $1.798464 $0.701136
(1) Ordinary Income Dividends are to be included as dividend income on
your tax return and 15.78% of these amounts are Qualified Dividend
Income.
A Form 1099 will be mailed to all shareholders of record on dividend record dates which sets forth the specific amounts to be included on their 2025 tax returns. For Corporate shareholders, 9.14% of Ordinary Income Dividends qualifies for the 70% corporate dividends received deduction.
State Tax Information:
10.4779% of the amounts reported in column (1) were derived from U.S. Treasury Securities.
Notice to Dividend Reinvestment Plan Participants:
When additional shares are issued by Source Capital under the Automatic Reinvestment Plan at a discount from the market price, a participant in the Plan is treated for federal income tax purposes as having received a taxable distribution equal to the market value of the shares purchased. In effect, the discount from market price at which shares are purchased is added to the amount of the cash distribution to determine the total value of the taxable distribution. Such value also becomes the participant's tax basis for the shares purchased under the Plan.
For the year ended December 31, 2025, none of the distributions paid were reinvested at a discount from the market price.
Deemed Distribution of $2.50739554 per share:
The Fund also announced a deemed distribution of $2.50739554 per share attributable to shareholders of record as of the close of business on December 31, 2025. We have provided a number of questions and answers below regarding deemed distributions generally, as the Fund has not retained realized gains since 1989.
What is a deemed distribution?
For U.S. federal income tax purposes, the Fund has elected to be treated as a registered investment company ("RIC") under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). To continue to qualify as a RIC for U.S. federal income tax purposes and obtain favorable RIC tax treatment, the Fund must meet certain requirements, including certain minimum distribution requirements. Subchapter M provides the Fund with two choices regarding distributing its net capital gains: (i) it can retain them and designate the retained amount as a deemed distribution or (ii) it can pay out the gains as a cash distribution to its shareholders.
The Fund has declared a deemed distribution of $2.50739554 per share to the Fund's shareholders of record as of the close of business on December 31, 2025. When the Fund declares a deemed distribution, instead of a cash distribution paid to shareholders, the Fund pays a 21% corporate-level U.S. federal income tax on the retained net long-term capital gains. In turn, shareholders are deemed to have received a capital gain dividend and are deemed to have paid the tax that is actually paid by the Fund. As a result, shareholders receive a tax credit that they can use to offset their tax on the deemed distribution or for other purposes, including claiming a refund, as appropriate. Shareholders also increase their adjusted tax basis in their shares of the Fund by the amount of the deemed distribution, net of U.S. federal income taxes paid by the Fund and deemed paid by the shareholder. The tax effect is the same as if the capital gains had been distributed to the Fund's shareholders in cash, who then elected to reinvest their proceeds, net of the tax paid by the Fund (i.e., 79% of the amount received after the 21% tax is applied).
Why did the Fund choose to declare a deemed distribution rather than a cash dividend at this time?
The Board of Trustees, after careful review and deliberation, determined that it is in the best interest of the Fund and its continued growth to declare a deemed distribution. The retained capital will enable the Fund to pursue future investment opportunities and allow the Fund's net asset value to continue to grow in an efficient manner.
What are the relevant distribution dates for the deemed distribution?
As there is no cash being paid out, there is no payment date for the deemed distribution. However, the deemed distribution of $2.50739554 per share and corresponding tax credit are attributable to shareholders of record on December 31, 2025.
Who will send me the tax information of the deemed distribution?
The deemed distribution is considered paid to shareholders of record as of December 31, 2025. All relevant tax information will be included in the Internal Revenue Service ("IRS") Form 2439 (Notice to Shareholder of Undistributed Long-Term Capital Gains), to be mailed in January 2026 to holders of record.
If you own your shares in "street name," your brokerage firm or bank will send you the relevant tax information. If you own your shares directly in your name, Equiniti Trust Company, LLC, the Fund's transfer agent, will send you the tax information. If you have not received the information by March 2026, you should contact your brokerage firm's or bank's tax department and request that information.
Please note, the Form 2439 will be mailed to the address of record on the account, therefore, if you hold your shares in a typical taxable account (e.g., a joint account, an individual account), your brokerage firm will mail the Form 2439 to the address of record (e.g., your home address). If you hold your shares in a tax-deferred account, such as a retirement account (e.g., an IRA, or Roth IRA), the Form 2439 for that account will likely not be mailed to you; rather, it will be delivered internally to the brokerage firm's custodian for the retirement accounts. For such accounts, your brokerage firm/custodian will file an IRS Form 990-T to request, on your behalf, a tax refund. The purpose of Form 990-T is further explained below.
What are the tax consequences of the deemed distribution to me as a shareholder?
The following example generally illustrates the tax treatment under Subchapter M of the Code for the Fund and its shareholders of record on December 31, 2025, with regard to the $2.50739554 per share net long-term capital gain to be retained by the fund and designated as a deemed distribution:
(1) The Fund will pay U.S federal income tax of 21% on the undistributed
net long-term capital gain on behalf of shareholders.
(2) All shareholders will receive a U.S. federal income tax credit equal
to their allocable share of the 21% U.S. federal income tax paid by
the company on the undistributed capital gain. Generally, this
credit will be applicable for the 2025 taxable year for shareholders
that are individuals or otherwise have a calendar-year taxable
year.
a. Shareholders that are subject to U.S. federal income taxation
generally can use that credit to offset their U.S. federal
tax liabilities for the stockholder's taxable year in which
the last day of the Fund's taxable year falls (generally, the
2025 taxable year for shareholders that are individuals or
otherwise have a calendar-year taxable year) and can claim a
refund on their U.S. federal income tax return (for example
on Form 1040) to the extent of any unused credit.
b. Shareholders who hold their shares in tax-deferred/retirement
accounts should not receive a Form 2439 directly, because the
Form 2439 will be delivered internally to the brokerage
firm's custodian for retirement accounts. The brokerage
firm/custodian will then use the Form 2439 information to
file an IRS Form 990-T on behalf of such shareholders, which
will allow such shareholders to receive a tax refund from the
IRS for the taxes the Fund paid on their behalf. Depending on
your brokerage firm/custodian, this process may occur
automatically, but the Fund recommends that shareholders
contact their brokerage firm's/custodian's internal tax
departments to ensure this process is taking place. It
typically takes several months to a year for brokerage
firms/custodians to receive the refund and deposit it into
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