NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Does the Investment Interest Limitation Explain the Existence of Dividends?

Daniel R. Feenberg

NBER Working Paper No. 530 (Also Reprint No. r0246)
Issued in August 1980
NBER Program(s):   PE

Miller and Scholes show that under certain conditions the Federal Income tax taxes dividend income at a rate no higher than the rate on capital gains. Tabulations of actual 1977 tax returns show that the special circumstances under which this can occur apply to less than 3% of dividend income and no significant role can be ascribed to their result in the determination of corporate dividend policy.

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Document Object Identifier (DOI): 10.3386/w0530

Published: Feenberg, Daniel. "Does the Investment Interest Limitation Explain the Existence of Dividends?" Journal of Financial Economics, Vol. 9, No. 3, (September 1981), pp. 265-269.

 
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