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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


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