Series 7 practice questionmediumTax Implications — Dividend Taxation
Dividends from which of the following would NOT qualify for the preferential qualified dividend tax rate?
- ACommon stock of a U.S. corporation held for 90 days
- BPreferred stock of a U.S. corporation held for 100 days
- CA real estate investment trust (REIT)✓ Correct answer
- DStock of a qualifying foreign corporation held for 80 days
Explanation
Why C — A real estate investment trust (REIT)
REIT dividends generally do not qualify for the preferential qualified dividend tax rate because they represent pass-through of rental income, which is ordinary income. REIT dividends are taxed at ordinary income rates (though they may qualify for a 20% Section 199A deduction). Dividends from domestic and qualifying foreign corporations that meet the holding period requirement are taxed at the lower qualified dividend rates.
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