Dividends And Other Corporate Distributions Flashcards
What are dividends?
Dividends are distributions paid by corporations to their shareholders. They are generally taxable and reported on Form 1099-DIV if the total is $10 or more.
What are the two classifications of dividends?
Dividends can be classified as Ordinary Dividends or Qualified Dividends.
How are ordinary dividends taxed?
Ordinary dividends are taxed as regular income.
How are qualified dividends taxed?
Qualified dividends are taxed at lower rates (0%, 15%, or 20%) if specific holding period and corporation requirements are met.
What are ordinary dividends?
Ordinary dividends are distributions paid from a corporation’s earnings and profits and are taxed as ordinary income.
What are qualified dividends?
Qualified dividends are a subset of ordinary dividends taxed at lower rates, similar to long-term capital gains.
What are the requirements for qualified dividends?
- Dividends must be from a U.S. corporation or qualified foreign corporation. 2. The taxpayer must hold the stock for more than 60 days during a 121-day period beginning 60 days before the ex-dividend date.
Are dividends used to buy more stock taxable?
Yes, if a dividend is used to purchase additional stock, it is still taxable.
How are distributions from money market funds reported?
Distributions from money market funds are reported as dividend income, not interest income.
What are capital gain distributions?
Capital gain distributions are payments from mutual funds or REITs and are always reported as long-term capital gains regardless of the holding period.
What are undistributed gains?
If the fund keeps the gains, taxpayers will receive Form 2439 and must still report these as long-term capital gains on Schedule D.
What are non-dividend distributions?
Non-dividend distributions are payments that reduce the taxpayer’s basis in the stock and are not taxable until the stock’s basis reaches zero.
What happens to non-dividend distributions after the basis reaches zero?
Any additional non-dividend distributions after that are taxable as capital gains (short-term or long-term, depending on the holding period).
When are distributions of stock or stock rights taxable?
Distributions of a corporation’s own stock or stock rights are generally not taxable unless shareholders can choose between cash/property or stock, the distribution changes ownership percentages, or it involves convertible preferred stock.
