Oracle is paying shareholders $867m in quarterly dividends early to beat a possible 2013 US tax hike. The company declared on Monday an accelerated second, third and fourth quarter cash dividend of $0.18 per share of outstanding common stock. The bonanza will be paid on 21 December 2012 instead of quarterly in 2013. Oracle’s …
"....Oracle’s single largest shareholder is chief executive Larry Ellison, but Oracle said in a statement its alpha-male boss had not participated in discussions or the board vote on the matter....." That's because there was no discussion - when Emperor Larry says jump the board don't even bother to ask how high! After all, MiG fuel and yatchs are expensive.
Actually, Ellison is an accomplished ventriloquist and closed the first half at the Palladium for many years.
Note that the 39.6% rate only applies to dividends on shares owned by highest-rate taxpayers (ie people earning more than $388350); whilst that clearly includes Larry, it may well not include a lot of people who have a thousand Oracle shares in their retirement funds.
Very good point - I've clarified that paragraph again.
And when taxable income falls next year...
...compared to this bumper year as all possible profit is brought forwards the don't tax the rich or they will run away crowd will be out in force. Longer term averages may reveal some trends but there will be these sorts of regulatory arbitrage opportunities that will distort the transition.
What will be interesting...
Is how much Oracle's stock will fall after the 21st, when owners and buyers have to look forward to 3 quarters without a dividend.
Where's that damn $ icon I have been asking for?
Dividend (usually) != ordinary income
"When the Bush-era tax cuts end, levies on dividends could jump, depending on one's income, from the six tax categories of 10, 15, 25, 28, 33 and 35 per cent to five categories of 15, 28, 31, 36 and 39.6."
Not quite. While the post-cliff rates are correct, today 'qualified' dividends are taxed at the 0% or 15% rate, not the ordinary income rates as shown in the article. Thus Larry goes from 15%->39.6%, NOT just 35%->39.6%.