Company: MYI
Filing Date: 2025-07-15
Form Type: 425
Source: 0001193125-25-159406
Chunk: 36

Company: BLACKROCK MUNIYIELD QUALITY FUND III, INC.
Filing Date: 2025-07-15
Form: 425
Chunk 36
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 the date Shares are purchased pursuant to the Offer and, in that event, the basis and
holding period of the Shares acquired will be adjusted to reflect the disallowed loss. The deductibility of capital losses is subject to a number of limitations under the Code.

. If none of the provisions under Section 302(b) of the Code outlined below are satisfied, a stockholder
will be treated as having received a distribution on its Shares. Any such distribution will be treated as taxable dividend income in an amount equal to the entire amount of cash received by the stockholder for its Shares pursuant to the Offer to the
extent the Fund has current or accumulated earnings and profits. Any amounts treated as distributions to stockholders in excess of the Fund’s current and accumulated earnings and profits will be treated as a return of capital to such
stockholders to the extent of their basis in their Shares (reducing that basis accordingly) and then as capital gain (which will be long-term or short-term depending on such stockholder’s applicable holding period for the Shares tendered).

Accordingly, the difference between “dividend” and “sale or exchange” treatment is important with respect to the amount
(there is no basis offset for dividends) and character of income that tendering stockholders are deemed to receive. While the marginal tax rate for dividends and capital gains remains the same for corporate stockholders, under the Code the top
income tax rate on ordinary dividend income and short-term capital gains of individuals generally exceeds the maximum tax rate on long-term capital gains.

Each stockholder’s tax adviser should determine whether that stockholder qualifies under one of the provisions of Section 302(b) of
the Code. In the event that the transaction is treated as a dividend distribution to a stockholder for federal income tax purposes, such stockholder’s remaining tax basis in the Shares actually redeemed will be added to the tax basis of such
stockholder’s remaining Shares in the Fund. In the event that a stockholder actually owns no Shares in the Fund after the redemption, but the transaction is nevertheless treated as a dividend distribution because such stockholder constructively
owns Shares in the Fund (see below), such stockholder’s tax basis may, under certain circumstances, be added to Shares in the Fund owned by related persons that were considered constructively owned by such stockholder, or may be lost entirely.
With respect to a purchase of Shares that is treated as a distribution but that is not otherwise taxable as a dividend because it exceeds the Fund’s earnings and profits, the method by