Tuesday, September 02, 2014 6:32:15 PM
integral Member Level Tuesday, 09/02/14 05:04:39 PM
Re: surfkast post# 75652
Post # of 75663
Hypothetically, if a company had $2M in cash, and paid out $1M in a dividend distribution, the shareholders pay income on the $1M in taxes. If the issuer expects the shareholders to reinvest, they will have less than $1M after the tax consequence. Why move working capital around in a manner that is taxable? If the normal shareholder has approx. 15%, the issuer only gets $850K in return. Now the issuer has $1.85M.
Why are they doing this?
Companies hire tax specialists to reduce the tax liability, not increase it.
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