I'm going through my mother's old Merrill Lynch statements from the 80s and one of her holdings is listed as "CORP INC FND106 MPS", which I presume was some kind of ML unit trust. It was priced monthly, so presumably marketable. It had a 10-12% yield, which was fairly typical for bond funds at the time. But the income was never reported on her her tax forms; however, it did show up as a "RECIP DIST" on the 1099s with a note, "Your distributions have been adjusted to reflect proper tax reportability." She had her taxes prepared by a CPA so presumably he knew what he was doing.
The NAV of the fund steadily declined over the 7 years she held it. I don't think the dividend was 100% return of capital. (What would be the point anyway of buying a fund that paid back mostly return of capital, unless it was some kind of tax oddity?)
Does anybody remember what this might have been? I have no idea, I didn't have any money to invest during that decade. The correctness of the tax return is moot, I'm just curious.