Consent Dividend Law and Legal Definition

Consent dividend is a dividend that is not actually paid to the shareholders, but that is taxed to the shareholders and kept as part of a company's retained earnings. It increases the basis in Corporation’s stock investment.

A shareholder may agree to have a dividend added to his/her gross income even if it not paid. A corporation declares a consent dividend to avoid or reduce an accumulated earnings or personal-holding-company penalty tax.

This may increase the shareholder's personal tax liability but may decrease the company's corporate tax liability, which may in turn help the share price.