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Corrections Corporation of America Message Board

  • newMK newMK Nov 10, 1999 10:50 AM Flag

    Another tax trick

    Just when you think you know what's going on, the
    good old Internal Revenue Code provides a
    surprise.

    All this time we've been thinking about how and how
    much with regard to the special dividend that will pay
    out the balance of old CCA's accumulated earnings and
    profits by 12/31/99. Now we find out that with the
    "regular" q4 dividend, it will already be paid, because for
    tax purposes payments are TREATED AS FIRST COMING OUT
    OF ACCUMULATED E&P (I guess this is unique for
    REITs). Thus the 95% of current year taxable income
    distributions haven't been made yet, and can actually be made
    sometime in 2000!!!

    REALLY confusing, but a net
    positive as they now have more flexibility. A bit late in
    figuring this out, though. Where were the multi-million
    dollar fee advisors last Q?

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • I am a bit confused and hope someone can
      help.

      Point 1:
      The balance sheet at 30 Sept
      shows:
      Distributions payable = 209,729
      Using 114003 Shares I get
      $1.84 per share.
      Since the 3Q dividend was paid by
      30 Sept and no other dividends have been declared I
      assume this $1.84 per share is the provision for the
      balance on the Special Dividend.

      Point
      2:
      Normalized earnings for 9 months come out at $1.42 (ie $1.90
      for the year).The 95% rule means that 1.90 x 95% =
      $1.80 Minimum dividend to maintain REIT
      status.

      HOWEVER actual earnings YTD are only $0.70 (ie $1.09 for
      the year). I assume the 95% rule applies to actual
      earnings so minimum dividend to maintain REIT status for
      1999 = 1.09 x 95% = $1.03 only!

      Point
      3:
      Total dividends payable inc balance of Special = 1.84 +
      1.03 = $2.87
      Dividends paid to date in 1999 = $0.55
      x 3 = $1.65
      Dividend still payable =
      $1.22

      Since dividend payments are applied to special first
      and normal second, from the above amount we have only
      1.84 - 1.65 = $0.19 of special left to pay
      out!

      Can someone please check my assumptions and let me
      know if I am right or wrong.

      Many Thanks.

    • I missed the call (sick kid) but from the posts I
      think I have a good grasp of what was discussed. A
      question - given the fact that the short-term pressure to
      fund the Special is off, why did we go through this
      big hoopla with finding a strategic investor? Is the
      company actually implying that they just figured this
      latest tax thing out this week?

      Did they take any
      questions from Analysts? If not, seems that they should
      have just put out a memo.

 
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