C Corp Dividends

[Snaggletoof]

Single owner of C-Corp wants to pay himself dividends. Fiscal year ended August 31.
Dividends could be declared for the year just ended simply by a corporate resolution.
Owner wants to do something very unselfish with the dividends, such as setting up a college fund for young people. He is meeting with bankers off and on, but bottom line, this has been only recently decided due to a number of factors and hasn't been done yet.

Question: Due date of the tax return is November 15. If he hasn't paid these dividends by then, can they be removed from retained earnings on the Sch L - Balance Sheet?

There is a parallel: If this were an expense payable to himself, the expense could not be deducted if the money had not been paid by the due date of the return. However, dividends are not an expense.

What say ye?

[John of PA]

Qualified?

While this does not address your specific question, I'm curious if the receipient of the dividend plans on paying only 15% maximum tax rate on them; and if so, do you plan on sending a 1099-DIV showing the Dividend as qualified?

[Snaggletoof]

Yes

John, yes to all your questions.

Obviously, if the dividends are not paid until 2008, he can't receive a 1099-DIV for 2007. But that possibility is one of the reasons I posted the original question.

[ChEAr$]

doesn't matter about due date of return

Single owner of C-Corp wants to pay himself dividends. Fiscal year ended August 31.
Dividends could be declared for the year just ended simply by a corporate resolution.
Owner wants to do something very unselfish with the dividends, such as setting up a college fund for young people. He is meeting with bankers off and on, but bottom line, this has been only recently decided due to a number of factors and hasn't been done yet.

Question: Due date of the tax return is November 15. If he hasn't paid these dividends by then, can they be removed from retained earnings on the Sch L - Balance Sheet?

There is a parallel: If this were an expense payable to himself, the expense could not be deducted if the money had not been paid by the due date of the return. However, dividends are not an expense.

What say ye?

A corporation may declare dividends any time it wants to, provided of course,
that retained earnings are sufficient therefore. Typically a corporation declares
x cents/dollars dividends to stockholders of records as of a certain date.

(If dividends were deductible by a corporation, then due date of return might matter.)

So the corporation can by action of board of directors declare a dividend, say,
on October 31, payable to stockholders of record as of November 5th. Reporting of
said dividends pertain to the calendar year anyway.