[admoin]

1) Qualified dividends are taxed at long-term capital gains rates. At the moment there is no differential.

2) There is no economic difference in retaining the earnings because although undistributed earnings defer shareholder-level tax, the income from those earnings will remain subject to current corporate-level tax and will still eventually be subject to shareholder-level tax. On a net present value basis, the result is the same. I agree it's counterintuitive.

[danteembermage]

The key with capital gains is that you choose the timing of the tax, so you can wait to capture the gain until you have realized losses to offset them. These tax rates change around occasionally so flexibility in timing has value.