Quick question: Are stock buy-backs tax deductable?
No, they are not. From the company’s point of view, dividends and share buy-backs are done with after-tax money (remember that dividends and share buy-backs do not flow in the income statement, therefore, they do not affect corporate income tax). Generally, from the shareholders’ point of view, both dividends and share buy-backs are taxable (special tax treatments might exist, though, for stocks held in a pension plan for example). Typically, dividends are taxed through income and share buy-backs through capital gains tax.
Excellent, thanks!!!
frenchriviera Wrote: ------------------------------------------------------- > …Typically, dividends are taxed through > income and share buy-backs through capital gains > tax. For individuals, taking part in a repurchase is the same as selling their shares to a third party. They will be taxed as a capital gain on the difference between the sale price and the cost basis on their stock.