Aaron owns 1,600 shares of LP Gas stock which he purchased six years ago at a price of $18 a share. Today, these shares are selling for $26 each. Assume a tax rate of 20 percent applies to both dividend income and capital gains received by individuals. Ignore costs. Given this hypothetical assumption, from Aaron's point of view a stock repurchase today would:

Question

Aaron owns 1,600 shares of LP Gas stock which he purchased six years ago at a price of $18 a share. Today, these shares are selling for $26 each. Assume a tax rate of 20 percent applies to both dividend income and capital gains received by individuals. Ignore costs. Given this hypothetical assumption, from Aaron's point of view a stock repurchase today would:

Quizplus · Accepted Answer

A stock repurchase can be more tax-efficient than a cash dividend because the investor has control over when to sell the shares and realize capital gains, potentially deferring taxes or paying them at a lower rate, unlike dividends which are taxed in the year they are received.

Aaron Owns 1,600 Shares of LP Gas Stock Which He