Relevance of dividends B. Taxes on the investor(continued) Corporations can typically exclude 70% of dividend income from taxation. Thus, corporations generally prefer to receive dividends rather than capital gaIns. The result is clienteles of investors with different dividend preferences. In equilibrium, there will be the proper distribution of firms with differing dividend policies to exactly meet the needs of investors n Thus, dividend-payout decisions are irrelevant. 18818-8 Relevance of Dividends Corporations can typically exclude 70% of dividend income from taxation. Thus, corporations generally prefer to receive dividends rather than capital gains. The result is clienteles of investors with different dividend preferences. In equilibrium, there will be the proper distribution of firms with differing dividend policies to exactly meet the needs of investors. Thus, dividend-payout decisions are irrelevant. B. Taxes on the investor (continued)