Constructive Dividend

A real dividend is a cash payment to a shareholder. Like...Duke Energy pays n dollars per quarter to holders of its stock. That's its dividend. But a constructive dividend is one that's...not really real. Meaning that there was, in fact, a payment...a taxable one...but that it came in the form of a benefit.

Like...what if Duke paid its dividend with $2 per quarter in free electric power? Or if CocaCola paid its dividend in cases of Coke? Well, there's clearly a taxable benefit there (and the IRS does tax it), even if it's not paid in cash. It's constructed or constructive in creative ways, but it still gets a visit from the IRS Grim Reaper.