Tag: Dividends
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Constructive Dividends – Definition, Understanding and Application
When a corporation confers an economic benefit upon a shareholder, in his capacity as such, without an expectation of reimbursement, that economic benefit becomes a constructive dividend, taxable as such. See INTERNAL REVENUE SERVICE NATIONAL OFFICE FIELD SERVICE ADVICE MEMORANDUM FOR DISTRICT COUNSEL, Number 200011003 dated October 27, 1999; specifically Page 4, 3rd paragraph.
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Owner’s Draw in Business
When an owner of a small business operation transfers money from the business bank account to their personal bank account the transaction is commonly referred to as a ‘Draw’. There are other terms but this is the traditional word used. The technical definition is: ‘A transfer of earnings from the business on behalf of the owner…
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Dividends and Distributions – Use in the Proper Context
Dividends and distributions refer to the payment of cash to investors. Why are there two separate terms? Well, the term is tied back to the type of entity that makes the payment.
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Passive Income
Passive income is a form of earning money without materially participating in the activity from which the income is derived. There are two definitions for the reader to understand. There is the common business definition and the tax code definition.