A corporate distribution to a stockholder that is viewed by the tax authorities (such as the IRS) as a dividend payment even though the company doesn’t recognize it as such. For example, a company may pay a manager who is also a stockholder a higher-than-usual salary so that it can use the payment as a tax-deductible expense rather than as an aftertax dividend payment. The tax authorities may decide that part of the payment is a constructive dividend and cannot be treated as a tax-deductible expense. A constructive dividend may also occur when a company sells or leases property to its stockholders for less than fair market value.
Finance
[related_posts_by_tax title="See also" posts_per_page="10" taxonomies="post_tag"]
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