What is a Share Premium dividend? (foreign stock)

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What is a Share Premium dividend? (foreign stock)

Post by international001 »

https://www.investopedia.com/terms/s/sh ... ccount.asp
Nominal Value of Stocks
The nominal value of a company's stock, or par value, is an arbitrary value assigned for balance sheet purposes when the company is issuing share capital – and is typically $1 or less. It has little to no bearing on the stock's market price. For example, if a company obtains authorization to raise $5 million and its stock has a par value of $1, it may issue and sell up to 5 million shares of stock. The difference between the par and the sale price of stock is called the share premium and may be considerable, but it is not technically included in share capital or capped by authorized capital limits. So, if the stock sells for $10, $5 million will be recorded as paid share capital, while $45 million will be treated as additional paid in capital.
I understand it's an accounting trick, so the capitalization of of a company has one fixed component, usually set when the company is created. The rest is that Share Premium account. Is there anything more to it?

From an international stock, I got a 'Premium Share Bonus'; so part of the Share Premium Account is distributed to shareholders. Is it something a US company would ever do?

In the foreign country where the stocks resides, the taxation means reducing the cost basis for that stock. There is no immediate withholding.

How would this be taxed by US? I couldn't find any info on pub550. Also, the acquisition of stock is previous to an step-up basis, so not sure if any tax should be forgiven.
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