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Author: TMFSynchronicity Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35400  
Subject: Re: Another alternative Date: 8/14/2000 11:03 PM
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in addition to rubindj's excellent summary of the dividends received deduction for corporations, let me add one point.

There is a lot of case law (and IRS regs, as well) revolving around the issue of whether an instrument is "debt" or "equity". I won't go into the specifics here (Section 385 of the Code is the pertinent section, but there's a lot of subjectivity involved), but suffice to say that it is possible for a company to issue something they name "preferred stock", yet it could be treated as a debt issue and not get the preferential tax treatment accorded to "dividends".

So, don't be surprised to find little "wrinkles" in preferred stock to ensure that it gets treated as equity rather than debt.

-synchronicity
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