Tax changes

Better idea: Eliminate Personal Income Tax on the Federal level.

Quote: Mission146

Income from Dividends = Tax Already Paid

How?

I own stock in Ford Motor.

Ford Motor makes $1MMM taxable income.

Tax paid.

Dividend paid to me.

Tax here = income taxed twice.

Quote: AZDuffman

I own stock in Ford Motor.

Ford Motor makes $1MMM taxable income.

Tax paid.

Dividend paid to me.

Tax here = income taxed twice.

Are the dividends that they have paid out to you deducted prior to the declaration of their net income or are they irrelevant to net income?

Obviously, dividends are paid by cash. Cash is on the assets side. How does that get balanced on the liabilities/shareholder equity side and what relationship does that have to taxable income?

(Before you try to BS me on this, I should let you know that I know the answers to the questions I asked. Also, one of them is a trick question.)

Quote: Mission146

Are the dividends that they have paid out to you deducted prior to the declaration of their net income or are they irrelevant to net income?

Obviously, dividends are paid by cash. Cash is on the assets side. How does that get balanced on the liabilities/shareholder equity side and what relationship does that have to taxable income?

(Before you try to BS me on this, I should let you know that I know the answers to the questions I asked.)

There relevance to net income depends on the company. Companies with losing quarters might still pay while some companies do not pay them at all. They do not affect net income at all.

If my accounting memory holds cash will be debited with shareholder equity credited, reducing both. There might be a dividend account like an owner drawing account on a proprietorship but like I said it has been years since accounting class.

I have never heard of dividends being tax deductible. They are not an expense so would not reduce taxable income.

Quote: AZDuffman

There relevance to net income depends on the company. Companies with losing quarters might still pay while some companies do not pay them at all. They do not affect net income at all.

If my accounting memory holds cash will be debited with shareholder equity credited, reducing both. There might be a dividend account like an owner drawing account on a proprietorship but like I said it has been years since accounting class.

I have never heard of dividends being tax deductible. They are not an expense so would not reduce taxable income.

This is where you start to run into trouble when it comes to your previous post.

How could you claim that a company could take a net loss for a period, whatever that period might be, and then say that income has already been taxed? If the company takes a net loss, then there wasn't any income to tax in the first place.

You are correct that cash is debited with shareholder equity receiving a credit. In other words, it has no bearing whatsoever on that company's net income and only has bearing on their cash on hand. Essentially, monetary value is being totally removed from the company on both sides of the balance sheet. The amount of cash is depleted, but then, to balance that out, shareholders no longer have as much equity in what remains after the dividend payout.

Therefore, that the company pays income tax if they even have net income for the year to begin with...and even that's assuming they don't have losses from previous years that can still be carried forward by way of Capital Loss Deduction, etc... has no bearing on whether or not dividend payouts should be taxed because dividend payouts are completely irrelevant to a company's income for a period.

If a company is losing money, or just cash poor, then they might prioritize having more cash on hand and thereby cancel (with proper notice), or reduce, a dividend...but the cash paid out for the dividend has absolutely no bearing on how much income a company made or how much of a loss it took; it's a completely internal transaction.

If you want to say taxes were already paid on the cash that a company is holding, even that wouldn't strictly be true.

Personally, I think holders of stocks that pay dividends...and maybe there's even something in the tax code that does this (as I sure as hell never read the whole thing) should have a particular period of time within the tax period (read: that tax year), or the following tax year, during which they can reinvest that money back into the company that paid out the dividends (i.e. buy more of their stock) and then that could nullify the dividend received as being taxable income.

I think it has become painfully clear that Duffman just isn’t an expert when it comes to heterosexual pedophiles or tax issues.

Quote: ams288

I think it has become painfully clear that Duffman just isn’t an expert when it comes to heterosexual pedophiles or tax issues.

I'm absolutely not an expert on tax or accounting issues; I just retained a few things from my H.S. and College classes on those subjects.

Quote: Mission146

This is where you start to run into trouble when it comes to your previous post.

How could you claim that a company could take a net loss for a period, whatever that period might be, and then say that income has already been taxed? If the company takes a net loss, then there wasn't any income to tax in the first place.

(snipped for space)

Well, if there is no income to tax then no tax should be due. It does not matter because again, it is nothing more than a sole proprietorship crediting a drawing account and debiting cash because the owner is taking some money out.

Income or loss, it does not matter as any tax liability is paid at the corporate level. The dividend is just letting the owners take a draw.

Quote: Mission146

I'm absolutely not an expert on tax or accounting issues; I just retained a few things from my H.S. and College classes on those subjects.

As do I, putting us both far ahead of a few on this board who do not know if cash has a credit or debit balance.

Quote: AZDuffman

As do I, putting us both far ahead of a few on this board who do not know if cash has a credit or debit balance.

I guess in terms of accounting. Speaking overall, there are a few people on this board to whom I am nothing but a grunting, unintelligent, subhuman ape barely capable of cognitive function, in comparison. I can probably forgive them if accounting was not their focus of study.