Two Harbors Investment Corp. (NYSE: TWO) today announced the tax treatment of common stock and preferred stock dividends declared in 2019 for Two Harbors Investment Corp. (“Two Harbors”). 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 2019 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 their 2019 dividends that are treated as excess inclusion income for federal income tax purposes. No portion of the company’s 2019 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.
Distributions for Two Harbors Investment Corp.
The Federal income tax classification of the Two Harbors 2019 common and preferred stock distributions as it is expected to be reported on Form 1099-DIV is set forth in the following tables.
2019 FORM 1099 – 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
|
2019 Total Distribution Per Share
|
2019 Ordinary Dividends
|
2019 Qualified Dividends(1)
|
2019 Capital Gain Distributions
|
2019 Nondividend Distributions
|
Section 199A Dividends(2)
|
Cash
|
3/19/2019
|
3/29/2019
|
4/29/2019
|
$0.470000
|
$0.470000
|
$0.044402
|
$0.000000
|
$0.000000
|
$0.425598
|
Cash
|
6/19/2019
|
7/1/2019
|
7/29/2019
|
$0.400000
|
$0.400000
|
$0.037789
|
$0.000000
|
$0.000000
|
$0.362211
|
Cash
|
9/19/2019
|
9/30/2019
|
10/28/2019
|
$0.400000
|
$0.400000
|
$0.037789
|
$0.000000
|
$0.000000
|
$0.362211
|
Cash
|
12/17/2019
|
12/31/2019
|
1/24/2020
|
$0.400000
|
$0.400000
|
$0.037789
|
$0.000000
|
$0.000000
|
$0.362211
|
Totals
|
$1.670000
|
$1.670000
|
$0.157769
|
$0.000000
|
$0.000000
|
$1.512231
|
(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
|
2019 FORM 1099 – 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
|
2019 Total Distribution Per Share
|
2019 Ordinary Dividends
|
2019 Qualified Dividends(1)
|
2019 Capital Gain Distributions
|
2019 Nondividend Distributions
|
Section 199A Dividends(2)
|
Cash
|
12/18/2018
|
1/11/2019
|
1/28/2019
|
$0.507810
|
$0.507810
|
$0.047974
|
$0.000000
|
$0.000000
|
$0.459836
|
Cash
|
3/19/2019
|
4/12/2019
|
4/29/2019
|
$0.507810
|
$0.507810
|
$0.047974
|
$0.000000
|
$0.000000
|
$0.459836
|
Cash
|
6/19/2019
|
7/12/2019
|
7/29/2019
|
$0.507810
|
$0.507810
|
$0.047974
|
$0.000000
|
$0.000000
|
$0.459836
|
Cash
|
9/19/2019
|
10/11/2019
|
10/28/2019
|
$0.507810
|
$0.507810
|
$0.047974
|
$0.000000
|
$0.000000
|
$0.459836
|
Totals
|
$2.031240
|
$2.031240
|
$0.191896
|
$0.000000
|
$0.000000
|
$1.839344
|
(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
|
| 2019 FORM 1099 – 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
|
2019 Total Distribution Per Share
|
2019 Ordinary Dividends
|
2019 Qualified Dividends(1)
|
2019 Capital Gain Distributions
|
2019 Nondividend Distributions
|
Section 199A Dividends(2)
|
Cash
|
12/18/2018
|
1/11/2019
|
1/28/2019
|
$0.476560
|
$0.476560
|
$0.045022
|
$0.000000
|
$0.000000
|
$0.431538
|
Cash
|
3/19/2019
|
4/12/2019
|
4/29/2019
|
$0.476560
|
$0.476560
|
$0.045022
|
$0.000000
|
$0.000000
|
$0.431538
|
Cash
|
6/19/2019
|
7/12/2019
|
7/29/2019
|
$0.476560
|
$0.476560
|
$0.045022
|
$0.000000
|
$0.000000
|
$0.431538
|
Cash
|
9/19/2019
|
10/11/2019
|
10/28/2019
|
$0.476560
|
$0.476560
|
$0.045022
|
$0.000000
|
$0.000000
|
$0.431538
|
Totals
|
$1.906240
|
$1.906240
|
$0.180088
|
$0.000000
|
$0.000000
|
$1.726152
|
(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
|
2019 FORM 1099 – 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
|
2019 Total Distribution Per Share
|
2019 Ordinary Dividends
|
2019 Qualified Dividends(1)
|
2019 Capital Gain Distributions
|
2019 Nondividend Distributions
|
Section 199A Dividends(2)
|
Cash
|
12/18/2018
|
1/11/2019
|
1/28/2019
|
$0.453130
|
$0.453130
|
$0.042808
|
$0.000000
|
$0.000000
|
$0.410322
|
Cash
|
3/19/2019
|
4/12/2019
|
4/29/2019
|
$0.453130
|
$0.453130
|
$0.042808
|
$0.000000
|
$0.000000
|
$0.410322
|
Cash
|
6/19/2019
|
7/12/2019
|
7/29/2019
|
$0.453130
|
$0.453130
|
$0.042808
|
$0.000000
|
$0.000000
|
$0.410322
|
Cash
|
9/19/2019
|
10/11/2019
|
10/28/2019
|
$0.453130
|
$0.453130
|
$0.042808
|
$0.000000
|
$0.000000
|
$0.410322
|
Totals
|
$1.812520
|
$1.812520
|
$0.171232
|
$0.000000
|
$0.000000
|
$1.641288
|
(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
|
2019 FORM 1099 – Preferred Series D
|
Box 1a Total
|
Box 1b Total
|
Box 2a Total
|
Box 3 Total
|
Box 5 Total
|
Distribution Type
|
Declaration Date
|
Record Date
|
Payable Date
|
2019 Total Distribution Per Share
|
2019 Ordinary Dividends
|
2019 Qualified Dividends(1)
|
2019 Capital Gain Distributions
|
2019 Nondividend Distributions
|
Section 199A Dividends(2)
|
Cash
|
12/18/2018
|
1/1/2019
|
1/15/2019
|
$0.484375
|
$0.484375
|
$0.045760
|
$0.000000
|
$0.000000
|
$0.438615
|
Cash
|
3/19/2019
|
4/1/2019
|
4/15/2019
|
$0.484375
|
$0.484375
|
$0.045760
|
$0.000000
|
$0.000000
|
$0.438615
|
Cash
|
6/19/2019
|
7/1/2019
|
7/15/2019
|
$0.484375
|
$0.484375
|
$0.045760
|
$0.000000
|
$0.000000
|
$0.438615
|
Cash
|
9/19/2019
|
10/1/2019
|
10/15/2019
|
$0.484375
|
$0.484375
|
$0.045760
|
$0.000000
|
$0.000000
|
$0.438615
|
Totals
|
$1.937500
|
$1.937500
|
$0.183040
|
$0.000000
|
$0.000000
|
$1.754460
|
(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
|
2019 FORM 1099 – Preferred Series E
|
Box 1a Total
|
Box 1b Total
|
Box 2a Total
|
Box 3 Total
|
Box 5 Total
|
Distribution Type
|
Declaration Date
|
Record Date
|
Payable Date
|
2019 Total Distribution Per Share
|
2019 Ordinary Dividends
|
2019 Qualified Dividends(1)
|
2019 Capital Gain Distributions
|
2019 Nondividend Distributions
|
Section 199A Dividends(2)
|
Cash
|
12/18/2018
|
1/1/2019
|
1/15/2019
|
$0.468750
|
$0.468750
|
$0.044284
|
$0.000000
|
$0.000000
|
$0.424466
|
Cash
|
3/19/2019
|
4/1/2019
|
4/15/2019
|
$0.468750
|
$0.468750
|
$0.044284
|
$0.000000
|
$0.000000
|
$0.424466
|
Cash
|
6/19/2019
|
7/1/2019
|
7/15/2019
|
$0.468750
|
$0.468750
|
$0.044284
|
$0.000000
|
$0.000000
|
$0.424466
|
Cash
|
9/19/2019
|
10/1/2019
|
10/15/2019
|
$0.468750
|
$0.468750
|
$0.044284
|
$0.000000
|
$0.000000
|
$0.424466
|
Totals
|
$1.875000
|
$1.875000
|
$0.177136
|
$0.000000
|
$0.000000
|
$1.697864
|
(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
|
In addition, Two Harbors declared dividends with respect to its Series A, Series B, Series C, Series D, and Series E preferred shares on December 17, 2019. The record date for Series A, Series B, and Series C preferred dividends was January 10, 2020. The record date for Series D and Series E preferred dividends was January 1, 2020. Accordingly, these preferred dividends will be taxable to stockholders in the 2020 year.
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 New York, New York, and is externally managed and advised by PRCM Advisers LLC, a wholly owned subsidiary of Pine River Capital Management L.P. Additional information is available at www.twoharborsinvestment.com.
Additional Information
Stockholders of Two Harbors and other interested persons may find additional information regarding the company at the Securities and Exchange Commission’s Internet site at www.sec.gov or by directing requests to: Two Harbors Investment Corp., 575 Lexington Avenue, Suite 2930, New York, NY 10022, telephone 612-629-2500.
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