Long-term capital gains, qualified dividend income
, ordinary income, and return of capital, if any, will be allocated on a pro-rata basis to all distributions to common shareholders for the year.
If Susie's ordinary income tax rate is 15% or lower, her preferential tax rate for qualified dividend income
These benefits will become even more significant once the IRS makes it clear that dividends received by Maltese corporations are eligible for qualified dividend income
(D) 25% of the excess (if any) of (i) the unrecaptured IRC Section 1250 gain (or, if less, the net capital gain (determined without regard to qualified dividend income
)), over (ii) the excess (if any) of (I) the sum of the amount on which tax is determined under (A) above, plus the net capital gain, over (II) taxable income; and
Likewise, any dividend taken into account for the purposes of calculating such income would not be not entitled to a reduced rate of tax as qualified dividend income
Dividends that are "qualified dividend income
" (see below) will be treated as gain properly taken into account for the portion of the taxable year on or after May 6, 2003.
Therefore, taxpayers in the 10 and 15% brackets will pay no taxes on qualified dividend income
received in 2008 or 2009.
Adjusted net capital gain also includes qualified dividend income
However, under JGTRRA 2003, "qualified dividend income
" (generally, dividends paid by domestic corporations and certain foreign corporations to shareholders) is treated as net capital gain and is, therefore, subject to lower tax rates.
Effective from tax year 1982, the first $100 ($200 for a joint return) of an individual's qualified dividend income
only is excluded from gross income.
1(h)(11)(B) defines "qualified dividend income
" as dividends received during the tax year from domestic corporations and qualified foreign corporations.
* Convert ordinary income to qualified dividend income
. Clients should consider shifting investments from ones where the income is taxed at ordinary rates, such as bonds, to stocks that pay dividends.