Advanced Corporate Income Tax
Category: Business and Money > Accounting
Asked by: sljames822-ga
List Price: $2.00
28 Sep 2005 07:28 PDT
Expires: 28 Oct 2005 07:28 PDT
Question ID: 573695
Can a corporation deduct the dividend payments made to shareholder?
Re: Advanced Corporate Income Tax
Answered By: omnivorous-ga on 28 Sep 2005 07:44 PDT
Sljames822 -- Under U.S. (GAAP) and IASB rules, dividends are paid from retained earnings. As Merrill Lynch's excellent publication, "How to Read a Financial Report" notes (p. 33 of the PDF document), "federal income taxes and interest charges must be paid before anything is available for shareholders." As a result, even preferred dividends -- which many analysts consider equivalent to debt -- have to be paid in after-tax dollars and are not tax deductible (though a bond would be). Merrill Lynch "How to Read a Financial Report" http://philanthropy.ml.com/ipo/resources/pdf/howtoreadfinreport.pdf Best regards, Omnivorous-GA
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