From the shareholders' perspective,a stock repurchase has a potential tax advantage over the payment of a cash dividend.

Question

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When a company repurchases its own stock, shareholders can potentially benefit from a lower tax liability compared to receiving a cash dividend. This is because dividends are typically taxed as income, whereas capital gains taxes on the sale of the repurchased stock may be lower. Additionally, shareholders can choose to defer the taxes on the capital gains by not selling the stock immediately. However, the tax advantage may vary depending on the individual's tax situation and the company's share repurchase program.

From the Shareholders' Perspective,a Stock Repurchase Has a Potential Tax