Income Tax in the United States and Dividend Income Essay Example

Rev. Ruling 82-11 states that Coyote Corp. is required to include the dividend income for federal tax purposes as they are contractually entitled to receive the dividend on the date of record. In contrast, Fox does not include the dividend income on their federal return. According to Rev. Rule 82-11, the ex-dividend rules of a stock exchange do not determine when a shareholder becomes entitled to a dividend for federal income tax purposes.

Y cannot transfer the burden of income taxation on dividends by selling the underlying shares of stock to Z after the declaration and determination of dividends, as Y is the record holder entitled to the declared dividend on the record date. Thus, the payment made by Z to Y consists of two separate items - the right to receive the dividend and consideration for the und