Der Pommersche Landbund

Bibliographic data

Monograph

Identifikator:: 1024749657

URN:: urn:nbn:de:zbw-retromon-52880

Document type:: Monograph

Title:: Der Pommersche Landbund

Place of publication:: Berlin

Publisher:: Vorstand des Deutschen Landarbeiter-Verbandes

Year of publication:: 1920

Scope:: 1 Online-Ressource (72 Seiten)

Digitisation:: 2018

Collection:: Economics Books

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Chapter

Document type:: Monograph

Structure type:: Chapter

Title:: Die Pommern-Konferenz des Deutschen Landarbeiter-Verbandes

Collection:: Economics Books

STOOK DIVIDENDS 35: which the particular thing distributed as a dividend was procured. If the dividend is declared payable in cash, the money with which to pay it is ordinarily taken from surplus cash in the treasury. But (if there are profits legally avail- able for distribution and the law under which the company was incorporated so permits) the company may raise the money by discounting negotiable paper; or by selling bonds, serip, or stock of another corporation then in the treasury; or by selling its own bonds, scrip, or stock then in the treasury; or by selling its own bonds, serip, or stock issued expressly for that purpose. How the money. shall be raised is wholly a matter of financial management. The manner in which it is raised in no way affects the question whether the dividend received by the stockholder is income or capital; nor can it conceivably affect the question whether it is taxable as income. . Likewise whether a dividend declared payable from profits shall be paid in: cash or in some other medium is also wholly a matter of financial management If some other medium is decided upon, it is also wholly a question of financial management whether the distribution shall be, for instance, in bonds, scrip, or stock of another corporation or in issues of its own. And if the dividend is paid in its own issues, why should there be a difference in result dependent upon whether the distribution was made from such securities then in the treasury or from others to be created and issued by the company expressly for that purpose? So far as the distribution may be made from its own issues of bonds, or preferred stock created expressly for the purpose, it clearly would make no difference in the decision of the question whether the dividend was a distribution of profits, that the securities had to be created expressly for the purpose of distribution. If a dividend paid in securities of that nature represents a distribution of profits, Congress may, of course, tax it as income of the stockholder. Is the result dif- ferent where the security distributed is common stock? Suppose that a corporation having power to buy and sell its own stock, pur- chases, in the interval between its regular dividend dates, with moneys derived from current profits, some of its own common stock as a temporary investment, intending at the time of purchase to sell it before the next dividend date and to use the proceeds in paying dividends, but later, deeming it inadvisable either to sell this stock or to raise by borrowing the money necessary to pay the regular dividend in cash, declares a dividend payable in this stock: Can anyone doubt that in such a case the dividend in common stock would be income of the stockholder and constitutionally taxable as such? (See Green ». Bissell, 79 Conn., 547; Leland ». Hayden, 102 Mass., 542.) And would it not like- wise be income of the stockholder subject to taxation if the purpose of the company in buying the stock so distributed had been from the beginning to take it off the market and distribute it among the stockholders as a dividend, and the company actually did so? And proceeding a short step further: Sup- pose that a corporation decided to capitalize some of its accumulated profits by creating additional common stock and selling the same to raise working capital, but after the stock has been issued and certificates therefor are delivered to the bankers for sale, general financial conditions make it undesirable to market the stock and the company concludes that it is wiser to husband, for working capital, the cash which it had intended to use in paying stockholders a dividend, and, instead, to pay the dividend in the common stock which it had planned to sell: Would not the stock so distributed be a distribution of profits—and, hence, when received, be income of the stockholder and taxable as such? If this be conceded, why should it not be equally income of the stockholder, and taxable as such, if the common stock created by capitalizing profits, had been originally: created for the express purpose of being distributed as a dividend to the stock- holder who afterwards received it? Second. It has been said that a dividend payable in bonds or preferred stock created for the purpose of distributing profits may be income and taxable as such, but that the case is different where the distribution is in common stock created for that purpose. Various reasons are assigned for making this dig- tinction. One is that the proportion of the stockholder’s ownership to the aggre- gate number of the shares of the company is not changed by the distribution, But that is equally true where the dividend is paid in its bond or in its preferred stock. Furthermore, neither maintenance nor change in the proportionate ownership of a stockholder in a corporation has any bearing upon the question here involved. Another reason assigned is that the value of the old stock held ig reduced approximately by the value of the new stock received, so that the stock- holder after receipt of the stock dividend has no more than he had before it was paid. That is equally true whether the dividend be paid in cash or in other

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