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Technology Stocks : Dell Technologies Inc.

DELL 119.87

-0.5%

12:21 PM EST

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To: PAL who wrote (61325)	8/27/1998 3:22:00 AM
From: Chuzzlewit	Read Replies (1) of 176387

Paul, actually it is still taxed twice, but the second time at a capital gains rate. Consider this. Suppose you have a company with a capitalized value of $50 billion, with 1 billion shares o/s, and with 100 million in excess cash. If the company uses that cash to repurchase 2 million shares, the value of the company will be unchanged, but now distributed over 998 million shares. So the value of each share will increase to 50.10. If the shares were immediately sold there would be an increase in capital gains of $0.10, which is exactly the same amount that would be realized if the company had instead dividended the $100 MM. The difference is the conversion of ordinary income (dividends) to capital gains, and the deferral of the taxes because capital gains are not due until the equity is sold. TTFN, CTC

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