Hi Tim, Duke & Thread, RE: " Under the earlier notion of a tax-free dividend, those 100,000 shares could generate $100,000 in tax-free income (to first order...there are still issues of AMT, etc. probably lurking about). Not a bad piece of change, and a nice tax savings! This could encourage more people to acquire stocks just for the living income.
But if Microsoft goes the "deemed dividend" route, it issues a $2 deemed divident chit per share that ONLY APPLIES TO SHARES SOLD. If our investor sells 1000 shares of Microsoft at $100 (to pick a round numbers example), with his purchase price basis increased by the $2 per share chit, then his savings are 20% x $2000. A measly $400. He still pays the 20% taxes on most of the capital gains.
In other words, he only gets the full benefit of the deemed dividends if he sells _all_ of his holdings.
...
So as I read the fine print, investors like ourselves in tech stocks will see little or no benefit. Companies like Microsoft and Intel will very likely _not_ be giving us substantial tax-free dividends. They will use the deemed dividends feature and our savings will be miniscule. Unless we sell the whole batch, which may be the intent of the fine print, to get those capital gains recorded as quickly as possible, on account of the drastic budget crisis.
Sleazeballs."
--Tim May
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Excellent post.
Duke, how does that relate to your post about getting "an investor closer to a company?"
Message 18421986
Regards,
Amy J |
