During 2021, Jayden Steele received a distribution of $24,000 on stock he owns in Razorbill Corporation. He had planned to report this amount as dividend income until he talked to his father-in-law, Jim. According to Jim, who had examined Razorbill’s financial statements, the company suffered an operating loss for the year. Consequently, Jim thinks that the distribution is a nontaxable return of capital. Because Jim is an accountant, Jayden is confused and seeks a second opinion from you. Write a letter to Jayden (1260 Pike Street, Eagle, ID 83616), explaining the possibilities involved.

Partial list of research aids:

Jason Michael Juha, 103 TCM 1338, T.C.Memo. 2012–68.