Acct 553 Week 5

When a company decides to pay dividends, it has to be careful on how much it will be given to the shareholders. It is of no use to pay shareholders dividends

According to Code § 311(b), if a corporation distributes appreciated property as dividend, the corporation is taxed on the gains of the property as if the company sold it. If the property has depreciated in value, the corporation can

The corporate reorganization should be structured as a divisive “D” reorganization and the restructuring process should conform to section 355 of the tax law in order to minimize the tax consequences of the reorganization.

Under section 368 of the Internal Revenue Code, a Type A reorganization is defined as a statutory merger or consolidation. The Type A reorganization is one of the more popular ways

According to the definition stock split is a method commonly used to lower the market price of a firm's stock by increasing the number of shares belonging to each shareholder. Companies are able to split their stocks in any number of ways. The most common stock splits are, 2-for-1, 3-for-2 and 3-for-1. For example, if you own 100 shares of a company that trades at $100 a share and it declares a 2-for-1 stock split, you will own a total of 200 shares at $50 a share after the split. It is also possible to have a

One of the main reasons why foreign firms are interested in buying U.S. companies is to gain entrance to the U.S. market. A decline in the value of the dollar relative to most foreign currencies makes this competitive strategy especially attractive.

Generally, a constructive dividend is unique from an ordinary dividend in many different ways. A constructive dividend is a form of payment to the shareholders from a corporation which can cause in financial benefits to its shareholder. Section 316(a) defines a dividend as any distribution of property (money, securities, and any other property except stock) that a corporation makes to its shareholders out of its current and accumulated earnings and profits after February 28, 1913. In other hand, a constructive dividend is a payment made by a corporation, which benefits to a shareholder even if the payment is made indirectly to the shareholder, and even there is no formal dividend declaration. Similarly, for tax purposes, the constructive dividend and normal dividend are treated the same as actual distributions, which are taxable to the shareholders to the extent of the current and accumulated earnings and profits of the corporation.

Some companies wishing to cut their shares in half might complete a 2 for 1 stock split, or cutting it into a third might do a 3 for 1 stock split. Usually after a company does a stock split, the company’s share price will increase or decrease. The most common stock split method used is the 2 for 1 and this usually results in the stock prices being halves, resulting in owning twice the number of share for halve the original price.

Dividends are the returns that ordinary shareholders obtain from the firms in which they made their investments in form of equity. They are paid periodically and may vary from year to year depending on cash requirements of the firm as well as the profitability level of the firm. Dividend policy shows the rationale through which firms use to allocate the profits of a firm in payment of dividends to the shareholders of the firm. Dividend may be paid in cash or through bonus stock. It is the desire to get this periodic payment those investors chooses to invest their funds in common stock of these firms.

The term constructive dividend is used to describe a disbursement made by companies that benefit a shareholder though the instalment is not carried out specifically to that shareholder and regardless of the possibility that no official dividend has been announced (Ault & Arnold, 2010). These types of dividends take place in organisations that are closely held and transactions between shareholders, and the company is often informal. There are situations when a shareholder is considered to have been given constructive dividends. The first one is when the shareholder gets a pay, a financial gain or a benefit. Such a dividend is taxed to the shareholder depending on the degree of the existing as well as accumulated earnings or the company’s profits and benefits. The second one is when the organization uses reserves that do not bring about a corporate finding the organization uses

Privatization has also been used to describe two unrelated transactions. The first is the buying of all outstanding shares of a publicly traded company by a single entity, making the company privately owned. This is often described as private equity. The second is a demutualization of a mutual organization or cooperative to form a joint-stock company.

Let us try to understand the concept of dividend. When a company earns the profit, it either invests that profit in back in the company for growth or pays back the profits to its shareholders in the form of dividends, so that they get some return from the investments

* A dividend paid as additional shares of stock rather than as cash. If dividends paid are in the form of cash, those dividends are taxable. When a company issues a stock dividend, rather than cash, there usually are not tax consequences until the shares are sold.

Dividends refers to the returns from investments in shares of Equity, they are simply the distribution of a firm’s profits (Net of Tax) to its Shareholders.

A stock split is a process in which the number of already issued shares increases without increasing the market capitalization of the company. In other words, Stock split is nothing but the division of already issued shares of a firm into a larger number of shares. Stock split increases the number of outstanding shares while at the same time decreasing face value & share price proportionally. i.e, when a company split its stock 2-for-1, then the number of shares will get double & face value, the share price will become half. The goal of the stock split is to make the stock accessible to as many investors as possible. A share split will result in all shareholders holding more shares in the company. But, their stake in the share