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To: portage who wrote (27117)	1/8/2003 2:03:46 AM
From: Raymond Duray	Respond to of 74559

portage, Thanks for that very interesting article. I was rather numb (and dumb) to the implications of the tax-free dividend dodge possibilities. This would seem to give the "creative financing" creepsters on Wall Street a whole new Pandora's Box to play with. Bully!

To: portage who wrote (27117)	1/8/2003 2:04:25 AM
From: LLCF	Read Replies (1) \| Respond to of 74559

I would think the issue is double taxation and would be attacked form the corperate side, not the dividend reciever. Any time you have different tax rates there are ways to create derivatives to create that lower rate for someone. So I would think they would simply eliminate the corperate tax on dividends paid out. People should still pay regular taxes on dividends. The strategy suggested has been going on around the globe for years where there are differentials in tax rates. Anyone who has coin simply calls his investment banker. Here's one that you can watch trade at the end of the year on the AMEX every year: finance.yahoo.com The play is you buy MO stock and put before the dividend EX date in December... the stock goes EX dividend and the put & stock value goes down by the amound of the dividend and doesn't come back into your portfolio until January. You keep doing this till you feel you've cheated the government out of enough float. DAK PS, not to worry Pezz... little guys cant' take advantage of this juicy fun stuff, but I hear they do OK in life. I personally called the SEC and the American exchange numerous times about the trade [as it was trading], but no one gave a rats ass. The compliance guy from the AMEX thought I was an asshole [I was a memeber] for trying to take volume away from the exchange.

To: portage who wrote (27117)	1/8/2003 4:20:30 PM
From: Moominoid	Respond to of 74559

Some more thoughts on tax free dividends. 1. It will encourage more payout of profits as dividends as intended but also off market share buybacks of the style common in Australia where a large component is deemed to be a special dividend. Usually this is the amount above the original IPO price. The amount of the IPO price is the capital payout. Then anyone who bought the stock at a higher price gets a capital loss + the dividend (in Australia the dividend contains a tax credit for tax already paid for by the company which can be used to rebate your own tax bill - some tricks possible in Australia with this won't be possible in the US). 2. Does this only apply to the personal income tax? Or will corporations with small holdings of stock in other companies not have to pay tax on the dividends? If the latter that could discourage one reason for mergers I think. And if not this puts a damper on the effect of the move. Anyway as a stock's price is partially determined by takeover value that too would reduce the total impact of the move. 3. Does it apply to paythrough of dividends from mutual funds etc? 4. How does it affect high-income small proprietors? On the basis of the way things work in Australia I would see them getting a tax break as they switch to paying themselves dividends instead of salary. But I'm not sure how the corporation tax affects them in the US and what the rates are exactly. It might pay for more people to incorporate too? 5. As dividends rise, capital gains will reduce. This is a further tax loss to the government. I don't know if that is figured into the $670billion. Probably not. Answers to queries will be appreciated. David