3 ms·
What I mean that the tax you pay on dividends is often more than the capital gains tax. So you might prefer that the company spend money to prop up the share p
by pfisherman 4y ago
What I mean that the tax you pay on dividends is often more than the capital gains tax. So you might prefer that the company spend money to prop up the share price by buying back stock rather than paying it out as dividends.
- rsj_hn 4y agoPerhaps there was some tax reform since I last looked, but generally speaking dividends are taxed at the long term capital gains rate. So they would be the same or less than capital gains (short term capital gains are just treated as income). I am not a tax accountant :) But I agree that many do prefer buybacks, for the reasons I outlined -- it gives investors a choice as to when to realize the gain. Some investors may not want to receive the gain each quarter. And this can be a tax benefit, not because the rate is different, but because the timing may be more convenient.
- pfisherman 4y agoI’ll defer to you on this one. I’m not a tax accountant either :)