Document Type



Optional Redemptions and Optional Dividends: Taxing the Repurchase of Common Shares, 78 Yale Law Journal 739 (1969)


The growth of share repurchasing as an element of financial strategy
for large, publicly held corporations' raises an issue of interpretation
under the federal income tax that has significance both for ordinary
investors and for the revenues. That issue-whether a corporate distribution
which results in the retirement of outstanding shares should
be treated as essentially equivalent to a taxable dividend-is an entirely
familiar one to tax lawyers, but it is one that has typically been
confined to closely held or family-owned corporations, whose cash distributions
are likely to take whatever form best suits the individual
tax and financial interests of their controlling shareholders. By contrast,
the owner of stock in a public company is powerless to dictate
the form in which corporate distributions may be cast, and the absence
of a family or other personal relationship between management
and shareholders is generally expected to relieve management of any
special concern for the tax objectives of shareholders. Moreover, those
objectives are probably so diverse and conflicting that no single distribution
policy would seem capable of satisfying all shareholders in
equal measure. Consequently, public companies with scattered stockholdings
do not commonly generate dividend equivalence problems,
and the ordinary investor is rarely an object of the tax collector's

Date of Authorship for this Version



share repurchase, dividend, redemption