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Technology Stocks : Dell Technologies Inc.

DELL 133.20

+5.7%

Nov 26 3:59 PM EST

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To: PAL who wrote (102619)	2/18/1999 1:23:00 PM
From: Chuzzlewit	Read Replies (1) of 176387

PAL, in fact share buybacks are dividends. Some time ago Geoff Nunn and I had extensive correspondence on this issue. The upshot is that share buybacks work just like dividends but they have the added advantage of being taxed at the capital gains rate. From a practical point of view, this means that if the cash spent to repurchase stock were instead used to pay a cash dividend it would be subject to ordinary income taxes in the year received. But since the repurchase of stock increase the value of the remaining shares outstanding it is taxed as capital gains, which means that not only is it taxed at a lower rate, but the tax is deferred until the sale of the security. This issue is discussed in most elementary finance textbooks. See for example, Higgins Financial Management: Theory and Applications. TTFN, CTC

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