black (12/28/82)
Dividends earned by stockholders are taxed as income, regardless of whether the dividends are received in cash or in the form of additional stock (reinvested). Right? Is there an exception to this for dividends due from utility stocks? I seem to remember reading that such dividends were tax deferred if they were invested in more stock. Is this true? Where can I find out about it? Deferred until when? Andrew Black
gear (12/31/82)
#R:uw-beave:-26600:uiucdcs:13200001:000:346 uiucdcs!gear Dec 31 09:42:00 1982 They have to be reinvested via a dividend reinvestment plan as I understand it. They are then deferred until you sell the stock at which time the basis of the stock so purchased is zero--that is, you will pay taxes on the total proceeds from the sale of the stock you so obtained, but at capital gain rates which are 40% of regular income rates!
tihor (01/02/83)
#R:uw-beave:-26600:cmcl2:10600001:000:684 cmcl2!tihor Jan 1 23:11:00 1983 Also please keep in mind that some dividend reinvestment plans offer a discount on the market price when they are converting your money into stock, and current IRS interpretation is that this discount is ALSO taxable income (a form of dividend.) The IRS has been making some relatively unpleasant rulings in this area and I suggest you check with a real accountant if you do not plan on declaring all reinvested funds as dividend income. (My father, a stock broker, went around this may pole a few times with the family lawyer and accountant since he thought the IRS rulings were not reasonable but we decided that it would not be cost effective to argue the case in tax court.)