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Strategies & Market Trends : P&S and STO Death Blow's -- Ignore unavailable to you. Want to Upgrade?

To: Boca_PETE who wrote (25077)	1/20/2003 10:03:03 AM
From: Moominoid	Respond to of 30712

MAX: RE:("Paid out dividends from COMPANIES that DID NOT PAY TAXES in that particular year TAXED at the present level to shareholders") Interesting and complex. Consider the complexity added by those multi-national companies. I wonder how that plays into what you are saying given the diversity in country by country international tax laws. I also heard that the portion of company pre-tax earnings for each year NOT PAID OUT AS A DIVIDEND would be a "DEEDED DIVIDEND" that shareholders would ADD TO THEIR INVESTMENT COST BASIS in the stock. Yup you will credits for taxes paid by corporations whose shares you own listed on your 1099 at the end of the year. If they are for actual dividends you can use them on your income tax and if they are for deemed dividends on your CGT in future by adjusting its cost basis. For multinationals that pay tax overseas on their profits and then claim a foreign tax credit so they don't have to pay further US taxes there will be no credits available to the investor. This is somewhat similar to the system in Australia where investors receive "franking credits" for Australian taxes paid on dividends but companies also pay unfranked dividends like News Corp which earns almost all its income outside Aus. Lots of companies have partially franked dividends to reflect the mix of taxes paid. Australia doesn't have the deemed dividend system, you only can get a franking credit there if a dividend was paid out. This encourages sophisticated tricks to pay out the credits involving off market buybacks... also companies up the dividend yield and then borrow more to invest. The US scheme gets around those issues, but it would be simpler to reduce and eventually abolish corporation tax while probably upping the withholding tax on dividends and profits repatriated overseas. David