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SIE practice questionmediumQualified Dividends

Qualified dividends receive preferential tax treatment compared to ordinary dividends. To be classified as qualified, dividends must meet which requirement?

  1. AThe dividends must exceed $1,000 per year
  2. BThe stock must be purchased through a tax-advantaged account
  3. CThe company must be listed on a U.S. exchange for at least 5 years
  4. 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 is irrelevant. Tax-advantaged accounts have their own rules, and the company's listing duration is not the holding-period requirement.

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