NEW YORK ( TheStreet) -- Warren Buffett's Berkshire Hathaway (BRK.B)has clarified that it will incur an effective tax rate of 14.175% on the $300 million in dividends that it will receive each year from Bank of America (BAC) and not 10.5% as stated in a Wall Street Journal editorial.
The company said that virtually all of the stocks that Berkshire owns are held in its property-casualty subsidiaries and the same will apply to the Bank of America preferred.
"The tax treatment for dividends paid by U.S. corporations to property-casualty insurance companies was materially changed by a law passed in 1986. The changes were described in detail in the chairman's letter included in Berkshire's 1986 annual report," the company said in a statement. "A minor change in rate was made in 1993. Since that time dividends that insurers receive from U.S. companies incur an effective tax rate of 14.175%. For Berkshire, that rate will apply to dividends it receives from Bank of America."
--Written by Shanthi Bharatwaj in New York
>To contact the writer of this article, click here: Shanthi Bharatwaj.
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