02-16-2014, 08:25 PM
(02-16-2014, 08:23 PM)hendi_alex Wrote: Roc is not necessarily a bad thing. If ROC is used because of a shortfall of earnings, IMO,that is 'bad' ROC in that it is a return of the investor's own money. But ROC often results, especially in REITs and MLPs, because depreciation affects GAAP net income. The thing is that while depreciation subtracts from net income, it doesn't't affect cash flow. This is usually an example of 'good' ROC, as the distribution was, in fact, actually earned. 'Good' ROC can also arise from the profitable sale of assets. For many investors who are affected by the AMT, such ROC can be a very good thing. For the rest of us it is still a good thing.
Wow I didn't know this.
Regardless though, ROC reduces your cost basis, albeit slowly, so it's still bad in that sense. Would you agree?