Tuesday, December 29, 2009

IRS extends guidance on taxable stock dividends.

Morrison & Foerster LLP has issued a note to clients on IRS's extension of Revenue Procedure 2008-68 on taxable stock dividends:
On December 23, 2009, under Revenue Procedure 2010-12, the Internal Revenue Service (“IRS”) extended the period of temporary guidance regarding certain stock distributions by publicly-traded real estate investment trusts (“REITs”) and regulated investment companies (“RICs”).
....
Revenue Procedure 2010-12 also clarifies it is permissible for the calculation of the number of shares to be received by any shareholder to be determined, over a period of up to two weeks ending as close as practicable to the payment date, based upon a formula using market prices that is designed to equate in value the number of shares to be received with the amount of money that could be received instead.

Having a longer determination period for the pricing of the dividend is a good thing, as it will reduce volatility during this sensitive interval.

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