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Plum Creek Timber Co. Inc. Message Board

  • stockfisher2025 stockfisher2025 Nov 26, 2004 3:52 PM Flag

    Return on Capital

    Return on Capital comes from the distribution on units (not shares) of MLP's (Master Limited Partnerships) The "distribution" (not dividend) is taxed at only 10 to 20% because the IRS looks at these distributions as return on capital rather than taxable income. The ROC does lower your tax basis in the stock/unit so it will raise your cap gains later on. Also a real bitch come tax time if not done correctly. IRS form K-1. MSFT or REIT's this would not apply.

    At least this is how I understand this Anyone else?

    BTW, I must admit holding PCL has been a real pleasure to own long term.

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    • Be a pretty long commute for you though. Although, we do have a great airport with quite a few daily flights to major airports.

      Any idea what the Park Service would sell Muir Woods for? After a visit to the area I was thinking that I wouldn't mind throwing up a hunting shack on the edge of that piece of forest. Pretty sure I could select cut it and make out OK on the deal. :)

    • coming from the Bay Area, basically anything you'd charge would seem reasonably priced.

    • Thanks Anonymous, that gosh darn tax man thinks of everything. :)

    • thanks for the info Bay. I recall the unbelievable interest rates, let's hope Super G's replacement is smarter than Volcker.

      Interesting how all the other pieces of the puzzle are now the same as then, including Opec's discussion on switching to the Euro.

      BTW, could I interest you in some reasonably priced real estate? :)

    • By definitition, S Corp treated as flow thru entity( like partnership or sole proprietorship) for federal tax purposes. All components of income and expense are reported on the shareholder tax return and corporation pays no taxes directly. Shareholder pays taxes on CORPORATE INCOME not dividends. Payment of dividend has no tax consequence. If S corp earns $100 per share, shareholder pays personal tax on $100 times number of shares held. This is true whether there is no dividend or $200/share distributed.

    • nobody, foreign or domestic, wanted to be holding financial assets (except hard-asset stocks) in the '70s, because the currency was depreciating 10 percent a year or more. Bonds were a trap. OPEC was threatening to price its oil in currencies other than the dollar. eventually the Fed under Volcker raised interest rates by a huge amount and forced a very deep recession, and hard assets like real estate tumbled because nobody could afford to finance them.

    • Thanks for posts fellas.

      Any idea why a Sub S dividend wouldn't be treated like a C corp. dividend?

    • Downside of Sub S treatment is state taxes. In states that recognize S status on state level, each shareholder must file personal return in the state. This can require a large number of state returns for a person whose S corp (or partnership) does business in many states.

      This is a major drawback to investing in pipeline MLPs which are another high yield vehicle

    • >no SS taken out of dividends and I believe
      >dividends are taxed at 15%.

      All subchapter S income is passed through. Most will be taxed at ordinary income rates rather than the special dividend rates, although you do avoid both corporate double taxation and FICA withholding on it.

    • of hard assets, is that because foreigners plant their money in "cheap" US real estate vrs. T bills?

      Did hard assets hold their inflated values once the dollar strengthened again back then?

      I have to admit I was watching Starsky and Hutch back then. :)

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