A hypothetical distribution (dividends) to holders of consent stocks on the last day of the tax year of a company (usually a personal holding company) after securing their agreement to treat it as an actual dividend. Consent dividends are normally paid in the form of retained earnings being credited to paid-in surplus. They are taxed to stockholders as standard dividends; however, the resulting tax liability is partially offset by an equivalent increase in the cost basis of the stock.

Consent dividends are only permissible on common stock and participating preferred stock, or shares of beneficial interest having similar characteristics. The amount of a consent dividend is treated as if it had been paid in cash to the consenting stockholders on the last day of the year, and the consenting stockholders are considered as having made an equivalent contribution to capital on the same day.