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Explanation for 70% Corporate Dividend Exclusion (Reply to this comment)
by dmabram
The author comments that he doesn't understand the rational behind the corporate dividend exclusion.
I believe the reasoning behind this is that corporations are already doubly taxed entities. That is, if you buy shares of a corporation and receive a dividend, the money has been taxed twice. First by the corporation when it reports its earnings. Second by you, when you declare the dividend as income.
Consider what happens when you hold stock in a corporation (call it AAA) that holds stock in another corporation (call it BBB). If this exemption didn't exist, your dividend would be triply taxed. Once by BBB as corporate earnings, then by AAA, as a dividend from BBB, then as personal income, when you received a dividend from AAA. If there were more corporations involved, the money would be taxed N times before it reached you, where N is the number of corporations.
Alternatively if AAA owned substantially all of BBB, then BBB's earnings would flow through to AAA with no tax penalty at all, as if they were one entity. This exemption just helps corporations that own shares in other corporations to operate on an equal playing field with individuals who own shares in a corporation, and corporations that own other corporations outright.
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Apr 09 '02
2:49 pm PDT
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Another great one... (Reply to this comment)
by jay1051971
Bryan -
Great series of reviews on taxes, and those scoundrels at the IRS.
I say we abolish the IRS, and hold military tribunals, indicting every IRS agent for Crimes Against Humanity... What do you say? How many are with me?!?
:)
(Vote Libertarian...)
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Jan 15 '02
12:31 pm PST
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