Company: SWZ
Filing Date: 2025-10-23
Form Type: N-2/A
Source: 0001999371-25-015937
Chunk: 15

Company: Total Return Securities Fund
Filing Date: 2025-10-23
Form: N-2/A
Chunk 15
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 subject to exceptions described in Section 305(b) of the Code, which include “disproportionate distributions.” A disproportionate distribution is a distribution or a series of distributions, including deemed distributions, that has the effect of the receipt of cash or other property by some stockholders or holders of debt instruments convertible into stock and an increase in the proportionate interest of other stockholders in a corporation’s assets or earnings and profits. The Fund believes that the receipt of the Rights pursuant to the Offering should not be treated as a disproportionate distribution for these purposes.

The Fund’s position regarding the tax-free treatment of the Rights distribution is not binding on the Internal Revenue Service (the “IRS”) or the courts. If this position is finally determined by the IRS or a court to be incorrect, whether on the basis that the issuance of the Rights is a “disproportionate distribution” or otherwise, the fair market value of the Rights would be taxable to Record Date Shareholders as a dividend to the extent of the Record Date Shareholder’s pro rata share of the Fund’s current and accumulated earnings and profits, if any, with any excess being treated as a return of capital to the extent thereof and then as capital gain. If the Fund’s position is incorrect, the tax consequences applicable to the holders may also be materially different than as described below.

The following discussion is based upon the treatment of the Rights issuance as a non-taxable distribution with respect to a Record Date Shareholder’s existing Shares for U.S. federal income tax purposes.

Tax Basis in the Rights. If the fair market value of the Rights a Record Date Shareholder receives is less than 15% of the fair market value of the Record Date Shareholder’s existing Shares (with respect to which the Rights are distributed) on the date the Record Date Shareholder receives the Rights, the Rights will be allocated a zero tax basis for U.S. federal income tax purposes, unless the Record Date Shareholder elects to allocate its tax basis in its existing Shares between its existing Shares and the Rights in proportion to the relative fair market values of the existing Shares and the Rights determined on the date of receipt of the Rights. If a Record Date Shareholder chooses to allocate tax basis between its existing Shares and the Rights, the Record Date Shareholder must make this election on a statement included with its timely filed tax return (including extensions) for the taxable year in which the Record Date Shareholder receives the Rights. Such an election is irrevocable. However, if the fair market value of the Rights