Dividends

Corporate payment to investors of common or preferred stock. This payment is authorized by the Board of Directors and paid based on a schedule prescribed by that board. It is in effect a form of a return on the investment.

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

Owner's Draw

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 is referred to as a draw’.

Passive Income

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. 

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