Sycamore can make no assurances as to the tax treatment of the cash distribution. Stockholders should consult their own tax advisors on such tax treatment, which varies by type of stockholder as well as by a stockholder's respective tax basis and holding period.
Generally speaking, for U.S. stockholders that are individuals, the cash distribution will be treated for U.S. Federal income tax purposes as follows: (1) as a "dividend" to the extent paid from Sycamore's current or accumulated earnings and profits, if any, as determined under U.S. Federal income tax principles ("E&P"); (2) next, as a non-taxable return of capital up to your individual income tax basis in Sycamore's stock (reducing your tax basis, but not below zero, by the amount of the distribution which is not a "dividend"); and (3) the remainder of the distribution in excess of your individual stock tax basis, if any, as a gain as if realized on the sale or other disposition of the stock.
At this time, Sycamore anticipates that it will have no current or accumulated earnings and profits as of the end of fiscal 2011. Accordingly, Sycamore currently expects that the cash distribution will be treated as a return of capital to U.S. individual stockholders to the extent of such stockholder's basis in Sycamore stock. This anticipated characterization of the distribution as a return of capital is based on Sycamore's actual tax-based earnings and profits through its most recent fiscal quarter ended October 30, 2010, as well as a reasonable estimate of current and accumulated earnings and profits for Sycamore's current fiscal year ending July 31, 2011. This characterization may change depending upon a number of factors, including Sycamore's actual tax results through July 31, 2011. Sycamore will inform stockholders of any change to the anticipated characterization of the cash distribution by providing an update on this web site.
These general principals of U.S. tax treatment should not in any manner be construed as tax advice. Stockholders should consult their own tax advisors regarding the particular consequences of the cash distribution, including the applicability and effect of any U.S. federal, state and local and foreign tax laws.
