Bob,
I didn't get the impression any of this was going to some kind of prorated system. If you're a shareholder of record on the dividend date, you declare the dividend.
What makes it complicated is you would have to keep track of every stock you own as far as when you bought it and how many dividends had been declared while you owned it. If you averaged down or added to the position several times, you'd have to calculate the cost basis for each buy. If you sold part of the position after making several buys spread out over a period of time, you'd have to keep track of if the sale was first in first out, or last in first out as long as you held the remainder of the stock.
For a person who sets aside money every month to go into a mutual fund, the fund would likely have to keep track of the information for each individual investor. Since companies don't report on the same day, or even for the same fiscal period, and funds tend to spread their buys and sells over a long period of time, a fund with 100 equities would be making some sort of adjustment almost every day. They would then have to calculate the cost basis for every single customer.
Then you'd have to figure out if it was a cash dividend or a cost basis dividend, and if it was a taxable dividend or non taxable dividend, and if it was for a taxable account or a non taxable account.
Every company would just about have to provide every shareholder with at least an annual dividend statement, which probably means extra work for the brokerages holding the stock in street name. Then every shareholder has to make sure they keep the paperwork where they can find it when they eventually sell the stock. And somewhere along the line the IRS has to be able to audit the whole mess. There isn't much chance the average schmuck who takes his 1040EZ to H&R Block will be able to figure it out.
I like the idea that it would make the tax accounting side of public companies more visible, but the logistics involved in putting it into effect would be absurd. Whatever the motivation behind introducing the proposal, it couldn't possibly have been meant to be taken seriously. |
