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Don't Bet On a Qualified Dividend Tax Rate Extension

11.01.2012

Don't Bet On a Qualified Dividend Tax Rate ExtensionAre you considering or do you believe that taking dividend distributions over the next 10 years is likely? Or, are you considering whether you should take dividends? We can help you determine whether taking a dividend in 2012 will maximize the overall rate of return to both the C Corporation and its shareholders. At Brown Smith Wallace, we have developed some tools to help you analyze how this applies to your specific fact pattern and strategic needs.

There are many considerations about whether a C Corporation should make dividend distributions, including:

  • Ability or limitation of the C Corporation to distribute cash to its owners in the form of deductible compensation
  • Owners’ current and future cash requirements and alternative investment options
  • Impact on future shareholder share transfer or share exit strategies
  • Impact on the C Corporation's equity and shareholder rate of return
  • Potential estate tax planning issues

Our analysis indicates that taking a dividend during 2012 versus the future, when tax rates on dividends are at the current ordinary income tax rates, can make an overall difference of up to 30% on the combined C Corporation and its shareholder’s expected rate of return over a 10-year period.

To discuss this issue with Doug, click the schedule a meeting button on the right. To learn more about other year-end tax planning issues, please click here.

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