Have you noticed a cancellation and simultaneous re-posting for a prior year US dividend from a Real Estate Investment Trust (REIT) in your custody account? This is a necessary tax adjustment to ensure the accuracy of your statements. This correction process is called reclassification.
Reason for the reclassification
Reclassifications primarily affect US REITs, where the definitive tax treatment of the dividend is not yet determined when the dividend is distributed. The relevant companies only report the final tax data to the US authorities during the following year. This may retrospectively change the tax treatment of earnings from the previous year.
Process
To correctly report US withholding tax to the US tax authority, the original, provisional dividend posting must be reversed (cancellation). The dividend is then credited with the known, correct tax treatment (re-posting).
For REITs, profit distributions usually occur four times a year, sometimes monthly. Unfortunately, we cannot consolidate the cancellations and re-postings of multiple distributions. Therefore, it is normal to receive multiple cancellations and re-postings throughout the year.
Duration and processing
Reclassifications are carried out in mid-April. Isolated further reclassifications may sometimes occur later in the year.
The postings for dividends you originally received in your Baader custody account may sometimes be processed at different times than dividends you received in your Scalable custody account.
Reclassifications for dividends originally distributed in your Baader custody account are shown in the transaction history as deposit (cancellation).
Reclassifications for distributions received in your Scalable custody account are marked as reclassification in the transaction history.
The process is automatic. No action is required on your part.