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Technology Stocks : Intel Corporation (INTC) -- Ignore unavailable to you. Want to Upgrade?

To: The Duke of URL© who wrote (172411)	1/9/2003 11:22:02 AM
From: Road Walker	Read Replies (1) \| Respond to of 186894

Here is a part of the WSJ article (copied from another thread): online.wsj.com ========== A Look at the Fine Print Reveals Capital-Gains Cut ...What about shareholders of a company that doesn't pay dividends? They get a break, too, but only when they sell their shares. Say a share is bought for $100 and the company has $6.50 a share in fully taxed profits that year. The company will notify the shareholder of this. Then, suppose the share is sold for $110, for a $10 profit. The capital-gains tax will apply only to $3.50 of the gains ($10 minus $6.50.) Each year, a holder will be able to increase his "basis" -- the cost for figuring out his gain on shares held, for tax purposes -- by the amount of the company's taxed profits. Why this wrinkle? The point of the plan is to stop taxing corporate profits twice -- once when the company earns them and again when the shareholder gets the benefit, either as a dividend or as a capital gain. The point is not to force companies to pay dividends. Doesn't this gut the capital-gains tax? The capital-gains tax -- now a maximum of 20% -- will apply only to gains on shares that exceed a company's taxed earnings. Gains on stock of companies that haven't made profits will be subject to capital gains. But profits on shares of many other companies may escape capital-gains taxes altogether. ...Would all corporations be able to pay tax-free dividends? No. Companies that by their nature don't pay income taxes wouldn't be able to pay tax-free dividends. This includes entities such as real-estate investment trusts and many types of closely held corporations -- for example, Subchapter S corporations that operate like partnerships, passing through their profits to shareholders. Would closely held companies that are taxable be able to game the system by declaring huge dividends? That seems unlikely [ho ho ho - XB]. They would have to have earned big profits on which they paid corporate income taxes. But the Treasury hasn't yet released all the rules to prevent abuse.