Subject: Re: back to topic (was Re: a stocks and dividends question)
From: "Stephen J. Turnbull" <>
Date: Fri, 10 Jan 2003 22:57:24 +0900

>>>>> "Zimran" == Zimran Ahmed <> writes:

    Zimran> A corporation can also return retained earnings to
    Zimran> shareholders through share buybacks. Share appreciation
    Zimran> through buybacks gets taxed at the lower, capital gains
    Zimran> level (~20%) instead of the higher income tax level
    Zimran> (~40%).

For the purpose at hand, this is a dividend by another name.  It
happens to fool the IRS, but aside from tax advantages, it's the same.

The point is that the company has decided to distribute rather than
retain (and reinvest) earnings.  I'm sure Robin and Tom would be just
as happy to get their annual checks labelled "share buyback" as if
they were labelled "dividend" (especially if their marginal tax rates
are > 20%, which seems unlikely for Tom), rather than wait for rather
more uncertain capital gains to materialize.

Institute of Policy and Planning Sciences
University of Tsukuba                    Tennodai 1-1-1 Tsukuba 305-8573 JAPAN
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