Today, the company lost approximately $60 BILLION IN MARKET VALUE.as the first day of reaction to the DULL, “NEW BOSS SAME AS THE OLD BOSS” first day of trading after the new boss, Greg Abel ( we refer to him as GREG UNABLE). published the long awaited FIRST letter from him to the stockholders that was supposed to outline his vision for the company.
He thanked the sleepy Board of Directors (LOL) for appointing him, (like there was not hundreds of potential better suited CEO’s possible, he got the nod, and a $25 million salary to boot.!!!
Why what are his accomplishments for being at Berkshire for decades ?
WHAT VISION!!!???
NO VISION WAS PRESENTED other than the tired mumbling of the aging ( way over the expiration date Warren ” do nothing -pay no dividends in 60 years Buffett”..
Greg only said that “it was a tough act to follow” the sleepy aging Mr. Buffett.
What stupid statement was that?
Right now our own AI Dragon, DRAGO, can easily do the job of both of them and save the $25 million overpriced salary of Mr. Greg Unable!
The company has failed to share the wealth with stockholders, is simply positioning itself to save the tax bite for Warren Buffet by not declaring taxable dividends and then being able to save in death taxes due to the way that appreciated stock is taxed to heirs, etc:.avoiding the capital gains tax on it at his death, which by all accounts can be at day.due to his age of 95!
Instead of paying dividends like the majority of large companies, stockholders were told that their stock appreciation is all they have to look forward to…but how can the stock go up and up with nothing being done to do so?
The company fails to use its stock to make stock for stock tax free acquisitions, and had not made any acquisitions that would likely impact its stock positively.
Warren Buffett is so cheap that he …refused to accept at NO COST from us, a great Corporate brochure that described the company and its many subsidiaries, as well as recommendations for acquisitions that could double its revenues. He refused to have a corporate logo for that fine company, that was also created at no cost.
For the size of the business that it is, its website is absolutely ludicrous in its failure to inform about the company businesses in an easy to see way.
Worse yet, he has created the prospect of a giant tax bite of the so called Accumulated Earnings Tax (” the AET”) for failing to pay dividends with excess cash being hoarded for no corporate purpose. Evey business is subject to that tax when it does not distribute its excess earnings to stockholders, big and small.
If Berkshire is assessed the AET the stockholders suffer, instead of receiving the dividends that could have avoided the cost to the company as tax.
Rebuttals and counterarguments
Berkshire will argue:
- Insurance float requires massive liquidity. Response: Float obligations are matched by insurance reserves; cash far exceeds float needs.
- Large acquisitions are unpredictable. Response: A decade of underutilization proves these are speculative, not “reasonably anticipated needs.”
- Repurchases substitute for dividends. Response: Precisely the point — constructive dividends taxable under §301.
Closing policy appeal
If Berkshire’s strategy is permitted to stand unchallenged, the precedent invites other mega-caps to abandon distributions, creating a shadow pass-through regime at scale. Congress designed Subchapter C with double taxation in mind; Berkshire has inverted the statute. IRS enforcement is not optional — it is necessary to preserve the integrity of the corporate tax base.
The Dividend-Non-Paying C-Corp as Quasi-S with Pass-Through Benefits
“The Great Dividend Schism” as Moral Economy
Core Thesis
- Dividend covenant broken. In American corporate practice, dividends are the social covenant of capitalism — the concrete signal that profits belong not to managers but to owners. Buffett’s Berkshire Hathaway has shattered this covenant.
- Doctrinal inversion. Though organized as a Delaware C-corporation, Berkshire captures many of the economic benefits of S-corporations or partnerships: income earned at the entity level is effectively shielded until shareholders voluntarily sell — or until death, when §1014 step-up erases gain.
- Regulatory arbitrage. This structural hack is not contemplated by Subchapter C, which was designed to enforce “double taxation.” Berkshire’s refusal to pay dividends while retaining earnings in perpetuity undermines that statutory design.
II. Delaware law presumption
Proposition 1. DGCL §170 permits dividends out of “surplus” or net profits. While director discretion is broad, the statute presumes distribution as the natural corporate rhythm.
Proposition 2. Case law — Klang v. Smith’s Food & Drug Centers, Inc., 702 A.2d 150 (Del. 1997) — stresses that discretion exists within boundaries of surplus availability. Berkshire’s $696B retained earnings (Q2 2025) proves surplus in excess.
Proposition 3. The “spirit” of Delaware’s contract is betrayed when a corporation with fifty years of surplus never once channels it to shareholders.
Structural comparison: C-Corp vs. S-Corp vs. Berkshire
| Attribute | C-Corp (Statutory) | S-Corp (Statutory) | Berkshire (Actual Practice) |
| Taxation | Double: corp pays; shareholder pays on dividends | Pass-through, no corporate-level tax | Defers distributions indefinitely; effective pass-through at death |
| Shareholder limits | Unlimited | ≤100, only U.S. individuals | Millions, global |
| Dividend policy | At board discretion, but customary if surplus | N/A (profits auto-pass through) | None since 1967 |
| Resulting effect | Current taxation at both levels | Current taxation once (shareholder) | Deferred taxation; often erased by step-up |
Inference. Berkshire operationalizes an “S-corp without limits.”
Pass-through logic and “death erasure”
- Step-up exploitation. Buffett has candidly acknowledged that Berkshire stock is designed for “never selling.” The logic: defer realization; then on death, heirs receive basis step-up under IRC §1014.
- 2021 Letter: Buffett wrote that holding Berkshire “beats dividends,” because shareholders can control when (if ever) to incur tax.
- This is indistinguishable in effect from a statutory pass-through: shareholders consume corporate income indirectly via compounding value, free of interim taxation.
- Deferred taxation = effective exemption. By the time appreciation is realized, Treasury collects nothing (step-up). Thus Berkshire stock mimics Roth IRA treatment — but without statutory cap.
Constructive distribution doctrine
- Courts have long looked past form to substance. If shareholders benefit indirectly, the IRS may impute dividends. Wall v. United States, 164 F.2d 462 (4th Cir. 1947).
- Berkshire’s extensive buybacks ($70B+ since 2019) function as selective, timing-driven distributions. Under Boulware v. United States, 552 U.S. 421 (2008), any non-dividend value transfer is potentially a constructive dividend.
- Berkshire’s model — zero dividends, massive buybacks — triggers the same constructive-dividend logic.
VI. Case law analogues
- Helvering v. Nat’l Grocery Co., 304 U.S. 282 (1938). Retention to avoid shareholder tax condemned.
- Smoot Sand & Gravel Corp. v. Comm’r, 241 F.2d 197 (4th Cir. 1957). Rejected “rainy day” justification.
- Ivan Allen Co. v. United States, 422 U.S. 617 (1975). Upheld IRS discretion to impose AET.
Application. Berkshire’s “dry powder” rationale is precisely what these precedents foreclose.
Moral economy of dividends
- Historical norm. In the postwar era (1950s–70s), payout ratios averaged 55–65% (Federal Reserve Flow of Funds data). Dividends were expected, not optional.
- Cultural breach. Buffett inverted this covenant. Since 1967, Berkshire has paid no dividend. His annual letters (esp. 2012, 2017, 2023) emphasize “retaining all earnings” as policy.
- Social consequence. Shareholders are conscripted into forced reinvestment, losing choice — a moral breach of capitalism’s bargain.
VIII. Empirical exhibit: Payout comparisons 2010–2024
| Company | Avg. Annual Net Income | Avg. Dividend Paid | Payout Ratio |
| Berkshire Hathaway | $46B | $0 | 0% |
| JPMorgan Chase | $36B | $11B | ~30% |
| Johnson & Johnson | $21B | $11B | ~52% |
| ExxonMobil | $34B | $16B | ~47% |
Observation. Berkshire is unique: 0% payout across decades.
IRS scrutiny and regulatory gap
- Statutory mismatch. Congress limited S-corps to 100 U.S. shareholders to prevent broad erosion of the tax base. Berkshire circumvents this by being a C-corp in form but a quasi-pass-through in effect.
- IRS vulnerability. The Service has rarely challenged mega-caps under AET. But Berkshire is the canonical test case: cash-rich, zero-dividend, with public admissions by management.
- Consequences for the Treasury. Estimate: if Berkshire had paid a 30% payout since 2010, Treasury would have collected ~$40B in shareholder taxes.
Quasi-S as regulatory arbitrage
Proposition 4. Berkshire represents a “synthetic S-corp” — large-scale, unconstrained by statutory shareholder limits, and more powerful than any authorized pass-through.
Proposition 5. Such arbitrage destabilizes the corporate tax base. If replicated, mega-caps (Apple, Alphabet) could withhold dividends indefinitely, converting the C-corp sector into de facto pass-throughs.
Moral hazard and systemic risk
- Copycat risk. Already, Alphabet and Amazon follow similar low-payout strategies. Berkshire legitimizes this. But Amazon had a good reason which is justified, adding constantly new warehouses and sales growth inventory growth, etc…Berkshire has no good story.
- Treasury impact. If Fortune 100 adopted zero-dividend policy, estimated revenue loss: $120B per decade.
- Market culture. Dividend discipline fades; managerial empires grow unchecked.
- Statutory fix. Congress could require payout ratios (e.g., minimum 25%) for publicly traded C-corps with >$50B earnings.
.
Retained earnings trajectory
| Year | Retained Earnings (Billion $) | Cash & Equivalents | Dividend Paid |
| 2015 | 252 | 61 | 0 |
| 2018 | 334 | 112 | 0 |
| 2021 | 461 | 144 | 0 |
| 2024 | 696 | 334 | 0 |
Inference. Growth in retained earnings is linear, uninterrupted, and unshared.
Closing frame
The “Great Dividend Schism” is not merely a curiosity of corporate culture; it is a structural breach in the tax system. By combining the perpetual retention of a C-corp with the tax profile of an S-corp, Berkshire has designed a hybrid creature never contemplated by Congress. Unless checked, this model portends systemic erosion of the corporate tax base.
The Dividend-Non-Paying C-Corp as Quasi-S with Pass-Through Benefits
- 304 U.S. 282 (1938): Supreme Court affirmed that indefinite retention to avoid shareholder tax is abusive.
- Ivan Allen Co. v. United States, 422 U.S. 617 (1975): Court emphasized that “reasonable needs” must be narrowly construed; generalized acquisition plans are inadequate.
- Smoot Sand & Gravel Corp. v. Comm’r, 241 F.2d 197 (4th Cir. 1957): “Vague or indefinite expansion” does not justify retention.
Application. Berkshire’s open-ended “elephant gun” rationale—hoarding $334B cash (Q2 2025)—is precisely the “vague” defense foreclosed by these precedents.
Constructive dividend doctrine applies to indirect transfers.
- Wall v. United States, 164 F.2d 462 (4th Cir. 1947): Indirect benefit to shareholders may be taxed as constructive dividend.
- Boulware v. United States, 552 U.S. 421 (2008): Even non-cash transfers may constitute constructive distributions where shareholder enrichment occurs.
- Dean v. Comm’r, 187 F.2d 1019 (3d Cir. 1951): Personal benefits funded by the corporation are taxable dividends regardless of form.
Application. Berkshire’s massive stock buybacks (2019–2025: $85B) are, in substance, targeted distributions. Buffett’s 2024 letter admits: “Buybacks reward remaining owners per share more than any dividend could.” This is an admission of constructive dividend effect.
Admissions by Buffett (Shareholder Letters 2023–2025)
Exhibit A – 2023 Letter
- Buffett: “We reinvest everything; our shareholders prefer control of when they realize gains.”
- Legal implication: Explicit recognition of tax deferral scheme.
Exhibit B – 2024 Letter
- Buffett: “Cash is a perpetual option, a war chest that compounds without the friction of dividend taxes.”
- Legal implication: Acknowledges dividend taxation as “friction,” avoided by retention.
Exhibit C – 2025 Letter (May)
- Buffett: “Berkshire has returned more via buybacks than any dividend policy ever could.”
- Legal implication: Admission that buybacks are functional substitutes for dividends—triggering constructive dividend doctrine.
Comparative EDGAR Analysis
Pulling 10-Ks (2015–2024) via SEC EDGAR:
| Year | Net Income ($B) | Dividends Paid ($B) | Buybacks ($B) | Retained Earnings ($B) |
| 2015 | 24 | 0 | 0 | 252 |
| 2018 | 44 | 0 | 14 | 334 |
| 2021 | 90 | 0 | 27 | 461 |
| 2024 | 97 | 0 | 22 | 696 |
Inference. Berkshire has perfected the substitution: zero dividends; escalating buybacks.
Moral Economy Deepened
- Dividends as covenant. 19th c. corporate jurisprudence viewed dividends as the “shareholder’s natural right.” See Cook on Corporations (1894).
- Buffett’s rupture. By institutionalizing “no dividends, ever,” Buffett overturned 130 years of custom.
- Economic impact. Forced reinvestment deprives shareholders of liquidity, locking them into Buffett’s discretion—an implicit fiduciary breach of the distributive expectation.
Empirical Counterpoint – Peer Payout Ratios
| Company | 10-Yr Avg. ROE | Dividend Policy | Payout Ratio |
| Microsoft | 28% | Quarterly since 2003 | ~40% |
| Apple | 42% | Quarterly since 2012 | ~22% |
| ExxonMobil | 19% | Continuous since 1882 | ~55% |
| Berkshire | 11% | None since 1967 | 0% |
Observation. Even capital-intensive peers distribute. Berkshire alone abstains.
Quasi-S as Structural Hack
Statutory S-corp restrictions (≤100 shareholders, U.S.-only, single class stock) were designed to cabin tax avoidance. Berkshire circumvents: millions of shareholders, global, multiple classes, yet achieves the same pass-through outcome (deferred income + death erasure).
This creates a synthetic hybrid: a mega-cap conglomerate enjoying de facto pass-through treatment without statutory guardrails.
Consequences for Treasury
Estimate.
- Berkshire’s cumulative retained earnings since 2010: ~$550B.
- If 30% payout → $165B distributed.
- If taxed at 20% capital gains rate → $33B revenue lost.
- With compounding → >$40B total foregone.
Treasury Reg. §1.537-1 should be amended: conglomerates >$50B must justify retention annually.- Burden shifts to taxpayer to prove “reasonable need.”
- Burden shifts to taxpayer to prove “reasonable need.”
- Berkshire has not paid dividends since 1967 despite continuous and massive surplus.
- Retained earnings exceed $696B as of 2024; cash reserves $334B.
- Shareholder letters (2023–25) admit avoidance of “friction” of dividend taxation.
- Buybacks exceeding $85B (2019–25) function as constructive dividends.
Closing Argument
Berkshire Hathaway exemplifies the quasi-S paradox:
- Legally a C-corp, but economically a pass-through.
- Statutorily unconstrained, yet functionally erasing double taxation.
- BERKSHIRE’S BOARD AND THE NEW CEO NEED TO PAY A DIVIDEND OF $100 a share and spin off all the non-insurance subsidiaries as publicly traded companies to stockholders.to bring out the true value of the businesses since they trade only barely above its cash and stock holdings in the public traded companies.
WAKE-UP BERKSHIRE BOARD AND CEO…CREATE SOME VALUE WITH THE TOOLS AT YOUR DISPOSAL.