Hi & thanks for using our service. I'll do my best to give you a complete & accurate answer. Please ask me to clarify anything you don't understand.
Thanks for asking for me; evidently the other professional didn't see that.
I followed the link that you left in your question.
The distributions are not dividends, they are non-taxable distributions of trust income, & as such reduce your tax basis (investment) in the Royalty trust; your taxable income, if any, is determined & reported to you by the end of year K-1 report issued by the trust;
What the comment with respect to capital gains means is that to the extent your original investment is partially returned to you in the form of cash distributions in excess of your royalty income (due to non-cash depletion & depreciation deductions
), then you will have a capital gain when either the distributions exceed your original investment in the trust, or the trust is disolved or terminated and any cash distributions exceed any remaining tax basis (investment) in the trust.
If you have any further questions, please let me know.If you need to contact me again with any tax or financial questions, you can just ask for "Steve G" at the beginning of your question. Again, please remember to rate my response. Bonuses, where you think they are warranted, and excellent ratings, are always most appreciated. Thanks again for using JustAnswer.com.