Final answer:
Share repurchases offer a tax benefit over dividends because capital gains, which arise from the increased value of shares after repurchase, can be deferred by the investors until the shares are sold.
Step-by-step explanation:
The tax advantage of share repurchases over dividends is that capital gains can be deferred by long-term investors. When a company issues dividends, these are typically taxed in the year they are received. However, a share repurchase can increase the value of the remaining shares, and if an investor decides to sell those shares, the capital gains are only taxed at that point of sale, which can be at a future date. This deferral provides a tax advantage to investors, as they have control over the timing of the tax event.