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Berkshire Hathaway

Discussion in 'Other Asset Classes' started by Redwing, 9th Sep, 2016.

  1. Redwing

    Redwing Well-Known Member

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    Just wondering re: Berkshire Hathaway and the no dividend compounding strategy

    Is the American tax system the same as the below?

    ATO:
    • Shares acquired through a Dividend Reinvestment Plan (DRP) are treated as though the investor received a cash dividend and then used this cash to buy additional shares in the company;

    • As such, dividends reinvested under the DRP are assessable as income tax — the same as if they were cash dividends. That is, they need to be included in each year’s assessment;

    • The price paid by the investor for the shares issued under the DRP form the cost base for the calculations of CGT, should the investor decide to sell those shares in the future.
     
  2. The Falcon

    The Falcon Well-Known Member

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    No idea mate, Google DRIP tax.

    Berkshire receives income from its investments and owned businesses and pays tax on that income. It then allocates that capital as Buffett, Jain, Abel, Combs, Weschler etc see fit. Holders have no direct tax consequences until they sell.

    I'd suggest if/when BRK-A/B institutes a dividend they will not offer DRIP.

    What are you trying to understand mate?
     
  3. chindonly

    chindonly Well-Known Member

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    They don't pay dividends, so there is no income?
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    This is not a dividend reinvestment plan but the Berkshire company retaining profits, paying tax, and then investing further. So the shareholder would have no tax to pay.

    This probably contributes to the high growth factor of the shares. imagine if ANZ had never paid out dividends, each year the value of the shares would be increasing and this compounding as well.

    Interest to buy these shares would not be deductible against income. It would be factored into the cost base when
     
  5. The Falcon

    The Falcon Well-Known Member

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    If ANZ didn't pay out dividends it would have blown the cash regardless !
     
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  6. austing

    austing Well-Known Member

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    Thank Christ WOW had been paying dividends prior to the Masters debacle! Imagine what the crew on board on that stage could have done with excess cash.

    Companies who pay no dividend at all that can be completely trusted to reinvest their earnings sensibly over time are few and far between. BRK has certainly been one of them.
     
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  7. Redwing

    Redwing Well-Known Member

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    Looks like Buffet gets tax credits on wind farms,is able to defer some taxes whilst the company is in acquisition phase and applies other tax advantages

    In Australia would companies be able to do this or would the ATO hit them for unrealized gains or similar?

    Berkshire's tax strategy seems a big part of the compounding it has
     
  8. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    There are lots of tax benefits in Australia. Not sure if a company that does nothing but own shares in other companies would be able to access many of these though
     
  9. trinity168

    trinity168 Well-Known Member

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