Biotech Values

[mouton29]

A few technical observations A distribution is a dividend to the extent of "earning and profits" for the current year or if there is accumulated earnings and profits. Earning and profits or "E&P" is a tax concept, it starts with taxable income and is then adjusted.

For IDT, the fact that the company has an accumulated deficit for financial purposes and has tax net operating losses is strongly suggestive that they don't have accumulated E&P. As to the current year, they have GAAP earnings but that seems to be from an accounting gimmick, a valuation allowances and the like that the tax law generally ignores. So it appears the company does not have current E&P, hence their distribution is not a dividend for tax purposes, it is a return of capital.

Dividends from a REIT generally don't qualify for the 15% rate, this is because REITs are able to deduct the dividends in computing their own taxable income. As to MLPs, they are partnerships and distributions from a partnership are almost never taxable, rather, the partners include in income their share of the partnership's income, whether or not it is distribution. I agree with you that the change in law should not affect payouts from REITs or MLPs. I suppose one might say that those two classes of investment will become relatively more attractive, if the 15% qualified dividend advantage of regular C corporations disappears.