Tax Information
For Shareholders on December 31, 2011
Capital Southwest Corporation met the applicable requirements of the Internal Revenue Code for Federal income tax treatment as a regulated investment company. Shareholders should consider the following when preparing 2011 tax returns.
Cash Dividends. The IRS Form 1099 reflects the $0.40 per share dividend paid on May 31, 2011 and the $0.40 per share dividend paid on November 30, 2011 which are qualified dividends and taxable at a maximum rate of 15% for individuals, estates or trusts.
Retained Long-Term Capital Gains. During the year ended December 31, 2011, Capital Southwest realized taxable long-term capital gains of $3,568,376 ($0.9504 per share) and will pay federal income taxes of 35%, equivalent to $1,248,932 ($0.3326 per share). Capital Southwest elected to retain these gains and, as a regulated investment company, has designated them to shareholders of record on December 31, 2011. The tax effect is the same as if the capital gains had been distributed to Capital Southwest shareholders, who then elected to reinvest 65% of the amount received. The 35% capital gains tax paid by Capital Southwest is considered to have been paid on behalf of the shareholders.
For Shareholders from 1968 through 2011
In certain years from 1968 through 2011, Capital Southwest made elections to retain taxable net long–term capital gains. The table below shows the record dates for all years for which Capital Southwest made such elections and the per share amounts of the retained long–term capital gains, the Federal income taxes paid and the amounts by which shareholders on each record date are entitled to increase the tax basis of each share (adjusted for stock splits in 1976, 1981 and 1987):
| Record Date | Retained capital gains per share | Federal income taxes paid per share | Increase in tax basis per share |
|---|---|---|---|
| Mar 31, 1968 | $0.5041 | $0.1292 | $0.3749 |
| Mar 31, 1969 | $0.3102 | $0.0852 | $0.2250 |
| Mar 31, 1970 | $0.2366 | $0.0662 | $0.1704 |
| Mar 31, 1983 | $1.2106 | $0.3390 | $0.8716 |
| Mar 31, 1984 | $0.1797 | $0.0503 | $0.1294 |
| Mar 31, 1985 | $0.3469 | $0.0971 | $0.2498 |
| Dec 31, 1986 | $3.2523 | $0.9106 | $2.3417 |
| Dec 31, 1989 | $3.2378 | $1.1008 | $2.1370 |
| Dec 31, 1991 | $5.9375 | $2.0187 | $3.9188 |
| Dec 31, 1992 | $2.0823 | $0.7080 | $1.3743 |
| Dec 31, 1996 | $4.7546 | $1.6641 | $3.0905 |
| Dec 31, 1997 | $4.9821 | $1.7437 | $3.2384 |
| Dec 31, 1998 | $0.2001 | $0.0700 | $0.1301 |
| Dec 31, 1999 | $3.0474 | $1.0666 | $1.9808 |
| Dec 31, 2005 | $3.5761 | $1.2516 | $2.3245 |
| Dec 31, 2006 | $8.1469 | $2.8514 | $5.2955 |
| Dec 31, 2008 | $3.9883 | $1.3959 | $2.5924 |
| Dec 31, 2009 | $0.622 | $0.2177 | $0.4043 |
| Dec 31, 2010 | $18.7106 | $6.5487 | $12.1619 |
| Dec 31, 2011 | $0.9504 | $0.3326 | $0.6178 |
Tax basis adjustments for shareholders who have owned stock since March 31, 1968 now total $43.6291 per share.
