American Software Announces Tax Treatment of 2023 Distributions
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Insights
From a taxation perspective, the classification of distributions as a return of capital rather than dividends has significant implications for shareholders. A return of capital reduces the shareholder's cost basis in the stock, which can defer capital gains taxes until the stock is sold. This is because the return of capital is not taxed immediately as income, unlike dividends. However, once the cost basis is reduced to zero, additional returns of capital are treated as capital gains and taxed accordingly.
For American Software, Inc.'s investors, this means that while they may see a reduction in immediate tax liability, they could face higher capital gains taxes in the future. Shareholders should be aware that the adjusted tax basis will determine the taxable amount when they decide to sell their shares. The deferral of tax liability could be beneficial for investors who are planning to hold onto their shares for a longer period or are in a higher tax bracket currently.
From a financial analysis standpoint, the announcement that American Software, Inc. is issuing a return of capital signals that the company is returning part of an investor's original investment rather than paying out profits. This can indicate several things about the company's financial health and strategy. It might suggest that the company does not have sufficient profits to distribute as dividends or is choosing to reinvest earnings into the company rather than pay them out. Investors often view dividends as a sign of a company's profitability and financial stability, so a return of capital could be interpreted differently.
Furthermore, this action could impact the stock price as it may alter investor perception. Some investors seek steady income from dividends and might not favor a return of capital. Conversely, this move could be seen positively if it aligns with a strategy aimed at long-term growth or if the company is managing its cash flows to support other initiatives that could enhance shareholder value in the future.
Understanding the broader market implications, a return of capital announcement can influence investor sentiment toward the sector or market as a whole. If similar actions are observed across other companies within the same industry, it might suggest a trend where companies are conserving cash. This could be due to a variety of factors such as economic uncertainty, industry downturns, or a shift in corporate finance strategies.
It is also important to consider the timing of such announcements. If this occurs during a period of economic growth, it may be counterintuitive and warrant a closer look into the company's rationale. Conversely, during economic downturns, such actions might be more common as companies strive to maintain liquidity. The market's reaction to such news will depend on the context within which this return of capital is happening and the overall performance and strategic direction of American Software, Inc.
This tax treatment will affect shareholders’ tax basis in their shares. To assist investors with tax reporting, Form 8937, Report of Organizational Actions Affecting Basis of Securities has been posted on the Investor section of the Company’s website under “Investor Relations.”
Shareholders should consult their tax advisors to determine how this change may affect their 2023 taxes.
About American Software, Inc.
Serving clients such as Big Lots, Bunzl Australasia, Carter’s, Destination XL, Glen Raven, Hostess, Husqvarna Group, Jockey International, Johnson Controls, Parker Hannifin, Red Wing Shoe Company, Spanx and Taylor Farms; our solutions are marketed and sold through a direct sales team as well as an indirect global value-added reseller (“VAR”) distribution network.
Fueled by supply chain master data, allowing for the automation of critical business processes through the application of artificial intelligence and machine learning algorithms to a variety of internal and external data streams, the comprehensive Logility portfolio delivered in the cloud includes advanced analytics, supply chain visibility, demand, inventory and replenishment planning, Sales and Operations Planning (S&OP), Integrated Business Planning (IBP), supply and inventory optimization, manufacturing planning and scheduling, network design and optimization (NDO), retail merchandise and assortment planning and allocation, product lifecycle management (PLM), sourcing management, vendor quality and compliance, and product traceability. For more information about Logility, please visit www.logility.com. Logility is a wholly-owned subsidiary and operating entity for American Software, Inc.. You can learn more about American Software at www.amsoftware.com, or by calling (404) 364-7615 or emailing kliu@amsoftware.com.
Logility® is a registered trademark of Logility, Inc. Other products mentioned in this document are registered, trademarked or service marked by their respective owners.
AMERICAN SOFTWARE, INC.
FORM 8937
ATTACHMENT 1
WITH RESPECT TO RETURN OF CAPITAL DISTRIBUTIONS
Part II, Box 14
American Software, Inc. declared and paid cash dividends to shareholders of record on the dates shown below. Each of these dividends constituted a return of capital for
Nondividend distributions made to holders of American Software, Inc. Common Stock (Ticker Symbol: AMSWA, CUSIP: 029683109) were as follows:
Record Date |
Payable Date |
Distribution Rate per Share |
Return of Capital % of Distribution |
2/3/2023 |
2/17/2023 |
|
|
5/3/2023 |
5/17/2023 |
|
|
8/11/2023 |
8/25/2023 |
|
|
11/17/2023 |
12/1/2023 |
|
|
Part II, Box 15
Each shareholder that received a dividend with respect to a share held on the Record Date must reduce its tax basis in that share by the percentage reflected of the amount of the dividend recorded that was a return of capital. To the extent that the dividends received exceed a shareholder’s tax basis in the share, the excess will constitute a taxable gain. Shareholders should consult their tax advisors with respect to the
Part II, Box 16
Please see Part II, Box 15 above for a general description of a shareholder’s change in basis calculation. The amount of the basis reduction described will be measured by the amount of cash distributions received.
Part II, Box 17
Tax consequences are determined under Sections 301(c) and 1001 of the Code.
Part II, Box 18
No tax loss will arise from the receipt of these cash distributions.
Part II, Box 19
Adjustments to the tax basis of stock (and of any taxable gain) resulting from these cash distributions are reportable in the tax period in which each distribution was received. For calendar year taxpayers, the reportable tax year for the aggregate distributions received is 2023.
Individual tax consequences may vary. Shareholders are urged to consult their own tax advisors. The information contained herein does not constitute tax advice. It is not intended or written to be used, and cannot be used, for the purpose of avoiding tax penalties.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240122620393/en/
Vince C. Klinges
Chief Financial Officer
American Software, Inc
(404) 264-5477
Source: American Software, Inc.
FAQ
What is the tax treatment of certain 2023 distributions by American Software, Inc. (AMSWA)?
Where can investors find Form 8937 for American Software, Inc. (AMSWA)?
How should shareholders handle the impact of the tax treatment on their 2023 taxes?
