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Me: The incentive to buy back shares rather than paying dividends might be even stronger, especially if -- and that word "if" is very important here -- the company can buy back its shares on foreign markets without repatriating assets that would become subject to taxation if repatriated.

You: They can't. Much too obvious a dodge. You can't buy US stocks with foreign profits without "bringing the money in" and declaring it. (It's a bit complicated: foreign companies are invariably subsidiary corporations of the parent corporation, and any monies they have have to be sent to the parent as "dividends" - although as the link below indicates they may be lent "short term" without tax implications. HP was doing that, and (in my view) is guilty of a tax dodge, and I should think would be liable for the amounts they have been playing with.)

It's not so obvious that they can't. The only caveat might be that the repurchase might have to take place on a foreign market, meaning that the shares would have to have a dual listing. But many multinational corporations do have dual listings, so this is not entirely out of the question. Indeed, a company with the resources of Microsoft list its shares on a foreign market expressly for that purpose.

FWIW, this would not be the only big hole in our nation's tax codes. Are you aware of the benefit of donating appreciated stock from your personal portfolio (it cannot come from an IRA, 401(k), 403(b), or other retirement account), rather than cash, to a charity? First, you don't realize the capital gain, and thus don't owe taxes on it, and, second, you get to deduct the full appreciated value for donation. And if you use the cash that you would have donated to replace the shares in your portfolio, your basis is what you actually pay for the replacement shares. Thus, this steps up your basis, reducing the amount of the capital gain, when you eventually liquidate the position.

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