FEDERAL INCOME TAX INFORMATION - 2006 Tax Year
(Unaudited)
Cash Dividends and Distributions:
|
|
Amount Paid Per Share
|
(1)
Ordinary Income
Dividends
|
(2)
Long-Term Capital Gain
Distributions
|
PREFERRED STOCK:
|
|
|
|
03/15/2006
|
$0.60
|
--
|
$0.60
|
06/15/2006
|
0.60
|
--
|
0.60
|
09/15/2006
|
0.60
|
$0.60
|
--
|
12/15/2006
|
0.60
|
0.60
|
--
|
TOTAL
|
$2.40
|
$1.20
|
$1.20
|
| |
COMMON STOCK:
|
|
|
|
03/15/2006
|
$1.00
|
--
|
$1.00
|
06/15/2006
|
1.00
|
--
|
1.00
|
09/15/2006
|
1.00
|
--
|
1.00
|
12/15/2006
|
1.00
|
--
|
1.00
|
12/15/2006 (special year-end)
|
|
--
|
074
|
TOTAL
|
$4.74
|
--
|
$4.74
|
The amount in column (1) is to be included as dividend income
on your tax return and 100% of this amount is Qualified Dividend Income and
qualifies for the 5% and 15% capital gains rates.
In accordance with the provisions of the Internal Revenue Code, the amounts in
column (2) are long term capital gain distributions and qualifies for the 5%
and 15% capital gains rates.
A Form 1099 has been mailed to all shareholders of record on dividend record
dates setting forth the specific amounts to be included in their 2006 tax
returns. For corporate shareholders, 100% of the amount in column (1) qualifies
for the 70% corporate dividends received deduction. Source Capital did not
elect to retain any undistributed long-term capital gains for the year ended
December 31, 2006. Therefore, Common shareholders will not receive a Form 2439
for 2006.
Notice to Dividend Reinvestment Plan Participants:
The information above shows the cash distributions paid by
Source Capital during 2006. 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.
The distributions paid during the year were reinvested at a discount from the
market price and the additional taxable amount of these distributions for each
Common share purchased is as follows: March 15, 2006, $3.7950 per share; June
15, 2006, $3.5925 per share; September 15, 2006, $3.3750 per share; December
15, 2006, $3.3400 per share.
State Tax Information:
None of the amounts reported in column (1) were derived from
U.S. Treasury Securities.
Certain states have reduced tax rates for capital gains attributed to
securities that meet certain holding periods. The following percentages should
be applied to the amounts in column (2): 4.9% of these gains were derived from
assets held 1-2 years, 17.5% 2-3 years, 25.6% 3-4 years, 39.2% 4-5 years, 9.3%
5-6 years, and 3.5% more than 6 years.