L
L. T. Portella
Where can I find the IRS rules for how much Retained Earnings can a company
have without having to pay dividends? Thank you
have without having to pay dividends? Thank you
L. T. Portella said:Where can I find the IRS rules for how much Retained Earnings can a company
have without having to pay dividends? Thank you
I believe what you have reference to is the fact that when a corporation hasL. T. Portella said:Where can I find the IRS rules for how much Retained Earnings can a company
have without having to pay dividends? Thank you
there is an accumulated earnings tax, searching onBob said:I don't think there are regulations like that, only those dealing with a
majority owner and salaries but ask in
Isn't that a dead letter? If MSFT could collect its kitty without payingIn alt.accounting said:there is an accumulated earnings tax, searching on
www.irs.gov with those keywords may help the
original poster.
Oh, dear. I got a little confused there, for a minute,David Jensen said:Isn't that a dead letter? If MSFT could collect its kitty without paying
that tax, I have no idea who might be hit with it.
Well, I have been teaching some accounting classes for a couple ofIn alt.accounting said:Oh, dear. I got a little confused there, for a minute,
seeing you here. I came over here for a *respite* from
the howler monkey house. Well, hello, and welcome
to alt.accounting!
It doesn't look as if there is much change in that law since I had to& here is a pointer to what I was thinking of:
http://www.irs.gov/publications/p542/ar02.html#d0e2914
MSFT - Microsoft. It has historically had a very large cash pile.Since I do financial, not tax, I don't really know who
gets hit with it or how the IRS determines what the
reasonable business needs are. I can say that when
I was working with a revenue agent on an audit,
about 1995, we were asked to justify our accumulated
earnings. (We had to keep the $ in order to support
our bonding line, and it wasn't a problem. We were
*also* asked to justify our officers' salary. This was
a construction co ~ 30 MM annual revenues). What
is MFST, I am unfamiliar with that?
Well, too cool. What do you teach? I applied to aDavid Jensen said:Well, I have been teaching some accounting classes for a couple of
years, so I thought I'd drop in to see what's going on here.
Yeah, I got the impression that the application wouldIt doesn't look as if there is much change in that law since I had to
last look at it. The question comes in application of the law.
d'oh. I normally see it referred to here as M$.MSFT - Microsoft. It has historically had a very large cash pile.
--tells us that things haven't changed much:
Year Ended June 30
1999 2000 2001(2) 2002(3) 2003(4)
Revenue
$ 19,747 $ 22,956 $ 25,296 $ 28,365 $ 32,187
Operating income
10,010 11,006 11,720 11,910 13,217
Income before accounting change
7,785 9,421 7,721 7,829 9,993
Net income
7,785 9,421 7,346 7,829 9,993
Diluted earnings per share before accounting change(1)
0.71 0.85 0.69 0.70 0.92
Diluted earnings per share(1)
0.71 0.85 0.66 0.70 0.92
Cash dividends per share
- - - - 0.08
Cash and short-term investments
17,236 23,798 31,600 38,652 49,048
Total assets
38,321 51,694 58,830 67,646 79,571
Stockholders' equity
28,438 41,368 47,289 52,180 61,020
I'm teaching as an adjunct -- whatever needs to be taught. I'm avoidingIn alt.accounting said:Well, too cool. What do you teach?
Good luck.I applied to a
PhD progam locally last year and did not get in. I
plan to try again &/or look for a position at a community
college.
Which is strange, since most closely held companies could be taxed asHowever, I am staying where I am right now,
because there are some things my company may be
doing that I would like to be involved in.
Yeah, I got the impression that the application would
be mostly to closely held businesses. This is not
because it can't be applied to companies with a lot
of shareholders. However, the purpose of the tax
is to provide a penalty for tax avoidance schemes.
Unless there is a small controlling group such as Gates and Allen whoThis is far, far easier to see in the case of a business
in which there are few owners or a control group
that stands to gain from avoiding paying the dividends.
When you get into a big public company with diffuse
ownership, I think it gets a bit sticky to try to say, well,
your dividend policy is being set in order to help the
multiple joe bloes who own your stock avoid taxes.
And ones with fewer expensive lawyers.I suspect, that the IRS would want to stick to clear-
cut cases.
Let's not forget the AMT which may also interact with this. I don'tI went and found the relevant part of the code on
FindLaw:
http://makeashorterlink.com/?C10121EC6
http://caselaw.lp.findlaw.com/casecode/uscodes/26/subtitles/a/chapters/1/sub
chapters/g/toc.html
But now I think about it, did the Congress actually
enact the law eliminating the "double taxation" of
dividends? I have to wonder how that would interact
with the AET, the intent of which is to force the
payment and taxation of dividends.
Certainly in their minds.d'oh. I normally see it referred to here as M$.
They need it to fund a predatory pricing scheme that
will enable them to take a monopoly position over
the entire internet. And the communications industry.
That's a reasonable business need, isn't it?
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