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Strategies & Market Trends : Value Investing

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To: Don Earl who wrote (16129)	1/11/2003 2:00:24 AM
From: Bob Rudd	Read Replies (2) of 78576

The Wall Street Journal reported a unique twist to Bush’s tax plan. In order not to discriminate against companies that do not pay dividends and do not wish to, retained earnings will be treated as reinvested dividends. This will allow investors to exclude the company’s increase in retained earnings when calculating their capital gains tax. To do this you gotta know the change in retained earnings over your holding period [Unless they arbitrarily specify the measure to begin and end at quarterly reporting periods]. Economics and policy makers are saying it's critical to the plan that it make neutral the decision to retain or pay dividends - they don't want to 'hollow-out' companies with good growth prospects by encouraging them to pay dividends instead of reinvesting in the biz. A further condition of either dividend or retained earnings/cap gains exemption would be that the company actually pay takes in the US so the Tyco's of the world and companies that don't pay taxes would be excluded. Proration or no...all this supports your assertion that this will be a bookkeeping nightmare.

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