3 ms·
It's really shuffling money from earnings into expanding an existing company is tax-advantaged. Let's say I own 100% of ACME, which made a $100 profit last year
by opportune 9y ago
It's really shuffling money from earnings into expanding an existing company is tax-advantaged. Let's say I own 100% of ACME, which made a $100 profit last year. Rather than receive that money as dividends and then reinvest it, which causes the money to be taxed now and for it to possibly be taxed at a higher rate than capital gains, I reinvest that money into ACME. This has the effect of deferring taxation on that profit and allows it to be taxed at the same rate as capital gains at a later date