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View Diary: Walmart owners look to slash federal tax payments (66 comments)

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  •  hi Tim - we'll see two things happen: (1+ / 0-)
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    Tim DeLaney

    dividend paying stocks will get hammered in the market.  prices would have to fall by more than 50%, and closer to 75%, for the dividend to generate the same after-tax yield.

    the second thing is exactly what you note: increased pressure to convert dividends to taxable gains through fewer dividends and more stock buybacks.  and, from a tax standpoint, that could be interesting, because the IRS can recharacterize stock purchases as dividends if the economic effect is more dividend than sale (for example, they look to whether there's been a change in the economics between the shareholders.  if everyone's shares have ratably decreased and they're all left in the same ex post position that they were in ex ante, its a disguised dividend).  because dividends and cap gains have been correctly equalized for so long, we've only see this come up in a handful of oddball areas of tax (viz, qualified small business stock sale exclusion), but it'll come roaring back if the rates diverge again.

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