re: Stock Repurchases and Kodak

Michael, you wrote:

“Payment of cash dividends is an alternative, but they are taxable as ordinary income whereas stock repurchases may subject the sellers to a lower capital gains tax.”

It depends on how long the stock is held:

http://taxes.about.com/od/income/qt/dividend_income.htm

“Dividends can be taxed either as ordinary income at ordinary income tax rates or at the preferred long-term capital gains tax rate. Dividends are classified either as ordinary dividends or as qualified dividends. All dividends are ordinary dividends. Some dividends are qualified dividends and qualify for the preferred tax rate of 0% or 15%.

To be a qualified dividend, the investor “must have held the stock for more than 60 days during the 121-day period that begins 60 days before the ex-dividend date.” However, this holding period is longer in the case of preferred stock: “you must have held the stock more than 90 days during the 181-day period that begins 90 days before the ex-dividend date if the dividends are due to periods totaling more than 366 days.” (Publication 550.)”

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10:58 am on January 23, 2012