Two Harbors Investment Corp. Announces 2022 Dividend Tax Information

Two Harbors Investment Corp. (NYSE: TWO), an Agency + MSR mortgage real estate investment trust, announced today the tax treatment of the company’s common stock and preferred stock dividends declared in 2022. This information is provided to assist stockholders with tax reporting requirements related to dividend distribution of taxable income by Two Harbors. Stockholders should review the 2022 tax statements received from their brokerage firms or other institutions to ensure that the statements agree with the information provided below. Additionally, as each stockholder’s tax situation may be different, stockholders are encouraged to consult with their own professional tax advisor with respect to their individual tax consequences.

Tax Treatment of the Common and Preferred Distributions

Two Harbors is required to report the portion of its 2022 dividends that are treated as excess inclusion income for federal income tax purposes. No portion of the company’s 2022 dividend distributions are expected to consist of excess inclusion income, which may be treated as unrelated business taxable income (UBTI) and subject to special tax reporting for certain tax-exempt investors.

Pursuant to the Internal Revenue Code of 1986, as amended, dividends declared by a real estate investment trust (REIT) during the last three months of a calendar year that are payable to stockholders of record on a specified date in such three month period, but which are actually paid during January of the following calendar year, are considered paid on December 31st of the calendar year in which the dividends were declared, to the extent of the REIT’s distributable earnings and profits.

The company’s common stock distribution, payable to stockholders on January 28, 2022, with a record date of December 29, 2021, is treated as a 2022 distribution for tax purposes and is reported on the 2022 Form 1099-DIV due to the REIT’s insufficient earnings and profits as of the tax year ending December 31, 2021. In addition, the company declared dividends with respect to its common stock and Series A, Series B and Series C preferred shares on December 19, 2022. The record date for the company’s common stock distribution was January 5, 2023, and the record date for the company’s Series A, Series B and Series C preferred distributions was January 12, 2023. Accordingly, these common and preferred distributions will be treated as a 2023 distribution for tax purposes and reported on the 2023 Form 1099-DIV.

Distributions for Two Harbors Investment Corp.

The federal income tax classification of the Two Harbors’ 2022 common and preferred stock distributions as it is expected to be reported on Form 1099-DIV is set forth in the following tables.

2022 FORM 1099-DIV – Common Stock

Box 1a Total

Box 1b Total

Box 2a Total

Box 3 Total

Box 5 Total

Distribution

Type

Declaration

Date

Record

Date

Payable

Date

2022 Total

Distribution

Per Share

Adjustments

2022

Ordinary

Dividends

2022

Qualified

Dividends(2)

2022

Capital Gain

Distributions

2022

Nondividend

Distributions

Section 199A

Dividends(3)

Cash

12/16/2021

12/29/2021

1/28/2022

$0.000000

$0.170000(1)

$0.170000

$0.000000

$0.000000

$0.000000

$0.170000

Cash

3/23/2022

4/4/2022

4/29/2022

$0.170000

$0.000000

$0.170000

$0.000000

$0.000000

$0.000000

$0.170000

Cash

6/22/2022

7/5/2022

7/29/2022

$0.170000

$0.000000

$0.170000

$0.000000

$0.000000

$0.000000

$0.170000

Cash

9/21/2022

10/3/2022

10/28/2022

$0.170000

$0.000000

$0.170000

$0.000000

$0.000000

$0.000000

$0.170000

Totals

 

 

 

$0.510000

$0.170000

$0.680000

$0.000000

$0.000000

$0.000000

$0.680000

(1) - Pursuant to IRC Section 857(b)(9), cash distributions made on January 28, 2022 with a record date of December 29, 2021 are treated as received by stockholders on December 31, 2021 to the extent of 2021 earnings and profits. As Two Harbors' aggregate 2021 cash distributions exceeded its 2021 earnings and profits, the January 2022 cash distribution declared in the fourth quarter of 2021 is treated as a 2022 distribution for federal income tax purposes and was not included on the 2021 Form 1099. If you were a stockholder of record as of December 30, 2021, $0.0000 was reported on your 2021 Form 1099 and $0.1700 is reported on your 2022 Form 1099.

(2) - Qualified Dividends shows the portion of the amount in Box 1a that may be eligible for capital gains tax rates.

(3) - Section 199A Dividends shows the portion of the amount in Box 1a that may be eligible for the 20% qualified business income deduction under Section 199A.

 

 

 

 

 

 

 

 

 

 

 

2022 FORM 1099-DIV – Preferred Series A

Box 1a Total

Box 1b Total

Box 2a Total

Box 3 Total

Box 5 Total

Distribution

Type

Declaration

Date

Record

Date

Payable

Date

2022 Total

Distribution

Per Share

Adjustments

2022

Ordinary

Dividends

2022

Qualified

Dividends(1)

2022

Capital Gain

Distributions

2022

Nondividend

Distributions

Section 199A

Dividends(2)

Cash

12/16/2021

1/12/2022

1/27/2022

$0.507810

$0.000000

$0.507810

$0.000000

$0.000000

$0.000000

$0.507810

Cash

3/23/2022

4/12/2022

4/27/2022

$0.507810

$0.000000

$0.507810

$0.000000

$0.000000

$0.000000

$0.507810

Cash

6/22/2022

7/12/2022

7/27/2022

$0.507810

$0.000000

$0.507810

$0.000000

$0.000000

$0.000000

$0.507810

Cash

9/21/2022

10/12/2022

10/27/2022

$0.507810

$0.000000

$0.507810

$0.000000

$0.000000

$0.000000

$0.507810

Totals

 

 

 

$2.031240

$0.000000

$2.031240

$0.000000

$0.000000

$0.000000

$2.031240

(1) - Qualified Dividends shows the portion of the amount in Box 1a that may be eligible for capital gains tax rates.

 

 

 

(2) - Section 199A Dividends shows the portion of the amount in Box 1a that may be eligible for the 20% qualified business income deduction under Section 199A.

 

 

 

 

 

 

 

 

 

 

 

2022 FORM 1099-DIV – Preferred Series B

Box 1a Total

Box 1b Total

Box 2a Total

Box 3 Total

Box 5 Total

Distribution

Type

Declaration

Date

Record

Date

Payable

Date

2022 Total

Distribution

Per Share

Adjustments

2022

Ordinary

Dividends

2022

Qualified

Dividends(1)

2022

Capital Gain

Distributions

2022

Nondividend

Distributions

Section 199A

Dividends(2)

Cash

12/16/2021

1/12/2022

1/27/2022

$0.476560

$0.000000

$0.476560

$0.000000

$0.000000

$0.000000

$0.476560

Cash

3/23/2022

4/12/2022

4/27/2022

$0.476560

$0.000000

$0.476560

$0.000000

$0.000000

$0.000000

$0.476560

Cash

6/22/2022

7/12/2022

7/27/2022

$0.476560

$0.000000

$0.476560

$0.000000

$0.000000

$0.000000

$0.476560

Cash

9/21/2022

10/12/2022

10/27/2022

$0.476560

$0.000000

$0.476560

$0.000000

$0.000000

$0.000000

$0.476560

Totals

 

 

 

$1.906240

$0.000000

$1.906240

$0.000000

$0.000000

$0.000000

$1.906240

(1) - Qualified Dividends shows the portion of the amount in Box 1a that may be eligible for capital gains tax rates.

 

 

 

(2) - Section 199A Dividends shows the portion of the amount in Box 1a that may be eligible for the 20% qualified business income deduction under Section 199A.

 

 

 

 

 

 

 

 

 

 

 

2022 FORM 1099-DIV – Preferred Series C

Box 1a Total

Box 1b Total

Box 2a Total

Box 3 Total

Box 5 Total

Distribution

Type

Declaration

Date

Record

Date

Payable

Date

2022 Total

Distribution

Per Share

Adjustments

2022

Ordinary

Dividends

2022

Qualified

Dividends(1)

2022

Capital Gain

Distributions

2022

Nondividend

Distributions

Section 199A

Dividends(2)

Cash

12/16/2021

1/12/2022

1/27/2022

$0.453130

$0.000000

$0.453130

$0.000000

$0.000000

$0.000000

$0.453130

Cash

3/23/2022

4/12/2022

4/27/2022

$0.453130

$0.000000

$0.453130

$0.000000

$0.000000

$0.000000

$0.453130

Cash

6/22/2022

7/12/2022

7/27/2022

$0.453130

$0.000000

$0.453130

$0.000000

$0.000000

$0.000000

$0.453130

Cash

9/21/2022

10/12/2022

10/27/2022

$0.453130

$0.000000

$0.453130

$0.000000

$0.000000

$0.000000

$0.453130

Totals

 

 

 

$1.812520

$0.000000

$1.812520

$0.000000

$0.000000

$0.000000

$1.812520

(1) - Qualified Dividends shows the portion of the amount in Box 1a that may be eligible for capital gains tax rates.

 

 

 

(2) - Section 199A Dividends shows the portion of the amount in Box 1a that may be eligible for the 20% qualified business income deduction under Section 199A.

Tax Treatment of the Reverse Stock Split

On November 1, 2022, the company completed a one-for-four reverse stock split of the outstanding shares of Two Harbors common stock (“Reverse Stock Split”). Pursuant to the Reverse Stock Split, every four (4) shares of issued and outstanding common stock were converted into one (1) share of common stock. As a result, stockholders must allocate the aggregate tax basis in their shares held immediately prior to the Reverse Stock Split among the shares held immediately after the Reverse Stock Split (including any fractional shares for which cash was received). In addition, any stockholder who was entitled to receive a fractional share as a result of the Reverse Stock Split instead received cash in lieu thereof and was deemed for federal income tax purposes to have received and then immediately sold such fractional share for cash.

Issuers of corporate securities are required to complete Internal Revenue Service Form 8937 to report organizational actions, including reverse stock splits, that affect the basis of the securities involved in the organizational action. Stockholders are encouraged to review Form 8937 for the federal income tax treatment of the reverse stock split. The 2022 Two Harbors IRS Form 8937, Report of Organizational Actions Affecting Basis of Securities, is provided on the Two Harbors website under the “Tax Information” section within the “Investors” and “Stock Information” sections.

Consult Your Tax Advisor

Stockholders may have additional reporting obligations to the Internal Revenue Service and/or other tax authorities.

The U.S. federal income tax treatment of holding Two Harbors common and preferred stock to any particular stockholder will depend on the stockholder’s particular tax circumstances. You are urged to consult your tax advisor regarding the U.S. federal, state, local and foreign income and other tax consequences to you, in light of your particular investment or tax circumstances, of acquiring, holding and disposing of Two Harbors common and preferred stock.

Two Harbors does not provide tax, accounting or legal advice. Any tax statements contained herein were not intended or written to be used, and cannot be used for the purpose of avoiding U.S., federal, state or local tax penalties. Please consult your advisor as to any tax, accounting or legal statements made herein.

Two Harbors Investment Corp.

Two Harbors Investment Corp., a Maryland corporation, is a real estate investment trust that invests in residential mortgage-backed securities, mortgage servicing rights and other financial assets. Two Harbors is headquartered in St. Louis Park, MN.

Additional Information

Stockholders of Two Harbors and other interested persons may find additional information regarding the company at www.twoharborsinvestment.com, at the Securities and Exchange Commission’s Internet site at www.sec.gov or by directing requests to: Two Harbors Investment Corp., 1601 Utica Avenue South, Suite 900, St. Louis Park, MN, 55416, telephone (612) 453-4100.

Contacts

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