Dividend tax

A dividend tax is an income tax paid on the earnings from a corporation that is distributed to its shareholders. Dividend payments are treated as ordinary income, and they are taxed as if the taxpayer had earned income through active work. Presently, there is much controversy surrounding the tax. The government taxes dividends twice: It first taxes corporate income, then taxes the same income again when shareholders receive dividends paid out of corporate income. Which is a “double taxation”( http://pages

A dividend tax is an income tax paid on the earnings from a corporation that is distributed to its shareholders. Dividend payments are treated as ordinary income, and they are taxed as if the taxpayer had earned income through active work. Presently, there is much controversy surrounding dividend tax. The government taxes dividends twice: It first taxes corporate income, then taxes the same income again when shareholders receive dividends paid out of corporate income. The double taxation raises

shareholders. Code Sec. (a). The character of the recognized gain depends on the property distributed; thus it may be ordinary income, capital gain, or Section 1231 gain. An example illustrating this section was the Tax Court, deciding in favor of the IRS, held in Pope & Talbot, Inc., v. Com,

substance-over-form concept to justify accounting for the GEICO and General Foods transactions as dividends distributions rather than sales of stock. Do you agree with Buffet that the substance of each of the proportionate redemptions was a dividend and not a sale of stock? In deciding how to account for an unusual or unique transaction for financial reporting purposes, should one consider the tax treatment applied to the transaction? Did Peat Marwick have a right to change its position on the

policy. D) debt policy. Answer: B 3) The date on which the board of directors of a company authorizes the dividend is called the ________ date. A) declaration B) record C) ex-dividend D) distribution Answer: A 4) The firm will pay the dividend to all shareholders of record on a specific date, set by the board, called the ________ date. A) declaration B) record C) ex-dividend D) distribution Answer: B 5) The date two business days prior to the date on which all

ways: (I) Dividends (II) Share repurchases (III) Interest payments A) I only B) II only C) III only D) I and II only Answer: D Type: Easy Page: 415 2. Dividends are decided by: (I) The managers of a firm (II) The government (III) The board of directors A) I only B) II only C) III only D) I and II only Answer: C Type: Easy Page: 416 3. Which of the following dividends is never in the form of cash? (I) Regular dividend (II) Special dividend (III) Stock dividend (IV) Liquidating dividend A) I only

Dividend Irrelevance Theory- Modigliani & Miller (1961) Since the emergence of the so-called irrelevance theorem by Miller and Modigliani (1961), many corporations are puzzled about why some firms pay dividends while others do not. They were the first to study the effect of dividend policy on the market value of firms by assuming that there are no market imperfections. Miller and Modigliani (1961) proposed that divided policy chosen by a firm has no significant relationship in as far as the market

both regular and special dividend initiation, and repurchase/ c. We need an exogenous shock to dividend tax rate in order to test how dividend taxation affect divided policy. I will use the 2003 Dividend cut. There are many factors for dividend vs repurchase. In addition to dividend tax, Roni also talked about the signaling role of payout policy, agency problem related to payout policy and behavioral biases related to divided vs, repurchase. Therefore, it is not clear now tax affected divided policy

Three main issues arise when it comes to dividend policy in firms. The first issue is whether dividend is needed or not and the second issue is regarding which one would be the best option among various payout methods. Lastly, the third issue is about dividend rate. Whether these issues will affect corporate values has been debated over the years. This paper will talk about such issues through the case study of Linear Technology. 1. Why dividend is needed. Linear Technology’s payout policy

2.4.1. Dividend irrelevance theory Miller and Modigliani (1961) proposed the dividend irrelevance theory, suggesting that the wealth of the shareholders is not affected by the dividend policy. It is argued that the value of the firm is subjected to the firm’s earnings, which comes from company’s investment policy. The literature proposed that, the dividend does not affect the shareholders’ value in the world without taxes and market imperfections or perfect capital market. Further they argued that