A deemed dividend is a designated undistributed capital gain dividend.
A company with a deemed dividend pays the taxes on the value of the dividend and the shareholders increase the cost basis of their shares. This is of benefit to the shareholders as it reduces the tax obligation upon the sale of the shares. Shareholders should receive a Form 2439 from their broker when a deemed dividend is issued.
Related Fool Articles
Recent Mentions on Fool.com
- Stocks to Watch: Small-Cap Companies Buffett Would Love
- Dividend Stocks: What You Need to Know
- BP Earnings: Oil Crash Takes Its Toll, but Dividend Is Secure
- Why Investors Should Love This Big Oil Company?s 5% Dividend
- Will Citigroup Increase Its Dividend on Wednesday?
- 3 Big Oil Stocks With Secure Dividends