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Old 09-23-2018, 09:46 PM
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Repurchase of shares to treasury stock

If a corporation repurchased outstanding shares to become treasury stock, would the money used for the purchase be considered a business cost (reduce income) or would it come from profit passed through to the shareholders (subject to income tax)? In essence, would the shareholders have to pay income tax on the money used to repurchase outstanding shares?



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Old 09-24-2018, 03:26 AM
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If a corporation repurchased outstanding shares to become treasury stock, would the money used for the purchase be considered a business cost (reduce income) or would it come from profit passed through to the shareholders (subject to income tax)?=============no;in general, Treasury stock is reported as a contra account recorded in the shareholder's equity section of the Statement of Financial Position of the corp: Treasury shares reduce shareholders' equity and are generally labeled as treasury stock. The buyout of the shares affects the cash and treasury stock accounts, both of which are the Statement of Financial Position of the corp.






In essence, would the shareholders have to pay income tax on the money used to repurchase outstanding shares?
===========================no; Stock repurchases are used as a tax efficient method to put cash into shareholders' hands, rather than paying dividends. Stock repurchase s have become an important way of distributing income to shareholders. Shareholders pay taxes on the profit of the sale of stocks.



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