Cal’s Thread
I agree that dividends are taxable to the recipient according to their marginal tax rate. Dividends represent the distribution of property made by a corporation to the shareholder. Based on the form of dividend under consideration, they are taxable differently (EveryCRSReport, 2014) . Dividend income is taxed, but taxing is done in various ways based on its status; it can either be qualified or not qualified. In qualified dividends, taxation occurs over the long-term rate of capital gains. Non-qualified dividends, like those provided by REITs, are taxed using the normal income rate. Based on the structure of corporation entities, there may be three or more taxable entities. This may result in the excessive taxation of those involved in receiving the dividend income. For the avoidance of this excessive taxation, deductions of dividends received apply to corporations based on the percentage ownership of the corporation providing the dividends. After the dividends are distributed, they are then subtracted from the earnings and profit of the paying corporation (EveryCRSReport, 2014) . Qualified dividends are identified as more attractive since they are taxed at lower rates. However, ordinary dividends are treated as ordinary income, which means that the dividend will be taxed at the same level as any other form of income. Hence, when making decisions concerning investments, potential tax consequences or benefits should be applied. While dividends are an essential form of income, wisdom, and understanding is required to make the right decisions. We should make sure that we have proper knowledge of any business dealings or other life activities before making a decision.
EveryCRSReport. (2014). The Taxation of Dividends: Background and Overview. EveryCRSReport.com. https://www.everycrsreport.com/reports/R43418.html
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TJ’s Thread
In income tax, as with other business dealings, we should make sure that we place God first as opposed to prioritizing our own flesh needs. In matters concerning income tax, several considerations should be made by a corporation before it makes a noncash distribution to shareholders (Hall, 2006). One of these considerations is whether the fair market value exceeds or is below the tax basis of the assets. If the FMV is greater than the tax basis, the corporation recognizes taxable gain to the distribution. Based on this, there will be an increase in the level of taxable income that a corporation receives. On the other hand, if the FMV is lower than the tax basis, there is no recognition of a deductible loss in the distribution (Hall, 2006). As the cash distribution to shareholders is a tax dividend, the fair market value is an essential consideration in dividends. When handling income tax, it also essential to consider respect for existing regulations and laws. As Christians, we are expected to engage in fair dealings and ensure that there is integrity in all we do. For instance, we should use the regulations proposed by the IRS as comprehensive guidance on how to recover stock or gain from the stocks and securities that are received. I completely agree that when it comes to income tax, we should be careful to do the right thing. To act as pillars of light in an area where tax avoidance has become all too common by establishing our integrity.
Reference
Hall, C. Wells III, "Tax Considerations of Transfers to and Distributions from the C or S Corporation" (2006). William & Mary Annual Tax Conference . 152. https://scholarship.law.wm.edu/tax/152
