Tax Treatment of Investment Products

What this video covers

• Why a regulated investment company under Subchapter M must distribute at least 90% of net investment income to avoid corporate-level tax, and why that percentage is the critical exam threshold
• How the conduit or pipeline theory preserves the character of income flowing from fund to shareholder, so interest stays ordinary and qualified dividends keep preferential rates
• The strict three-step netting order for capital gains and losses: short-term against short-term first, then long-term against long-term, then the two results combined
• Why only $3,000 of excess net capital loss deducts against ordinary income annually, with unused losses carrying forward indefinitely while retaining their character
• Which distributions are never qualified dividends regardless of holding period: money market fund dividends and Real Estate Investment Trust (REIT) dividends
• How the wash sale rule operates across a 61-day window (30 days before, the sale day, 30 days after) and why buying replacement shares in an Individual Retirement Account (IRA) permanently destroys the loss
• When inherited securities receive automatic long-term holding period treatment versus when gifted securities carry over the donor's original holding period and cost basis