SIE practice questionmediumQualified Dividends
Qualified dividends receive preferential tax treatment compared to ordinary dividends. To be classified as qualified, dividends must meet which requirement?
- AThe dividends must exceed $1,000 per year
- BThe stock must be purchased through a tax-advantaged account
- CThe company must be listed on a U.S. exchange for at least 5 years
- DThe stock must be held for more than 60 days during the 121-day period around the ex-dividend date✓ Correct answer
Explanation
Why D — The stock must be held for more than 60 days during the 121-day period around the ex-dividend date
For a dividend to be qualified (and taxed at the lower long-term capital gains rate), the shareholder must hold the stock for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date. The amount of the dividend (B) is irrelevant. Tax-advantaged accounts (C) have their own rules. The company's listing duration (D) is not a requirement, though the company must generally be a U.S. corporation or qualified foreign corporation.
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