Don't try any of this stuff at home.
Simple one -- buy dividend paying stock on margin. If you have enough investment income, the interest payments offset that income, and the dividends are tax free. Umm, that's some productivity.
I'm told you (well not you, actually) can buy stock and use derivatives to turn this into an asset economically equivalent to a bond (citation available upon request).
Take your company offshore to some place w/o a corporate tax. Profits are untaxed at source, dividends are untaxed at destination.
Favorite quote:
" . . . Andrew Kessler called dividends an admission by management that they have nothing better to do with the money. 'If they won't invest in themselves, why should I?' he snarled."
(Tax Notes)
Favorite conspiracy theory:
Stocks are overvalued now. Richies would like to unload them w/o taking a loss. Dividend exclusion gives them automatic boost in share price if the tax break is capitalized into the price. Then they sell to the suckers, who take a bath later when shares settle down to historic P/E ratios.
Political economy question:
Bondholders (and owners of mortgage-linked securitie and tax-free muni's) should dislike this proposal. Corporate managers don't want to be bothered with requests for higher dividend payouts; less money for them to play with. Tech firms don't need this; they raise money on the promise of capital gains.
Who will support this proposal?
mbs
-----Original Message----- From: owner-lbo-talk at lists.panix.com [mailto:owner-lbo-talk at lists.panix.com]On Behalf Of Doug Henwood Sent: Wednesday, January 08, 2003 4:02 PM To: lbo-talk Subject: more tax games