Are excessive rents or royalties paid to shareholders a constructive dividend?
Yes. If a company pays rent on a facility that is significantly above market rate, that could be a constructive dividend. The company should assess what the market rate for rent is, and understand if the rent they are paying to a shareholder is at market rate or significantly above.
Excessive royalties to shareholders’ can also be seen as a constructive dividend.
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Are interest free loans to shareholders are constructive dividend?
Yes. If an interest free loan is provided to a shareholder, the loan could be seen as a constructive dividend. The rationale is that there is no reason for a company to loan money to a shareholder interest free since that is not consistent with general market behavior.
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What is a constructive dividend?
A constructive dividend is a payment, allowance, loan or other form of financial benefit from a corporation to a shareholder that is not intended to be a dividend payment but that ends up being classified by the IRS as a dividend. Examples of constructive dividends include excess salaries paid to shareholder employees, sale of assets below FMV,...
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Is the sale of an asset below FMV to a shareholder considered a constructive dividend?
Yes, this would be an example of a constructive dividend if the asset was sold to a shareholder. As a reminder, a constructive dividend is a payment, allowance, loan or other form of financial benefit from a corporation to a shareholder that is not intended to be a dividend payment but that ends up being classified...
Are interest free loans to shareholders are constructive dividend?
Yes. If an interest free loan is provided to a shareholder, the loan could be seen as a constructive dividend. The rationale is that there is no reason for a company to loan money to a shareholder interest free since that is not consistent with general market behavior.
What is a constructive dividend?
A constructive dividend is a payment, allowance, loan or other form of financial benefit from a corporation to a shareholder that is not intended to be a dividend payment but that ends up being classified by the IRS as a dividend. Examples of constructive dividends include excess salaries paid to shareholder employees, sale of assets below FMV,...
Is the sale of an asset below FMV to a shareholder considered a constructive dividend?
Yes, this would be an example of a constructive dividend if the asset was sold to a shareholder. As a reminder, a constructive dividend is a payment, allowance, loan or other form of financial benefit from a corporation to a shareholder that is not intended to be a dividend payment but that ends up being classified...
