Series 7 - Taxation 2

Taxation of Dividends

qualified dividends

taxed at the investors capital gains rate

nonqualified dividends

taxed at the taxpayers ordinary income rate

lower rates than ordinary income

tax rate on cash dividends from corporate stock (common and preferred)

dividends-received deduction

corporate benefit of receiving tax deductions (50% or higher) on dividends corporations receive on dividends from other corporations.

Form 1099-DIV or Form 1099-INT

Portfolio income is reported where?

Form 1099-DIV

details cash dividends paid, cash dividend that qualify for lower tax rates, and capital gains distributions paid by investment companies and REITs

Form 1099-INT

details interest paid by bond issuers. broker into taxable and non taxable interest.

No

Are stock dividends or stock rights taxable when they are received?

No (per share cost basis changes)

Does cost basis change when there is a stock dividend?