Dividend Distributions: Qualified and Non-Qualified

What this video covers

• The three tests a dividend must pass to earn qualified status: U.S. or qualified foreign payer, not on the exclusion list, and holding period met
• The common stock holding period of more than 60 days within the 121-day window centered on the ex-dividend date, and why exactly 60 days fails
• The preferred stock exception: more than 90 days within the 181-day window beginning 90 days before the ex-dividend date
• Why real estate investment trust (REIT) dividends, money market fund dividends, and dividends paid on a short position are automatically non-qualified ordinary income
• The definition and tax treatment of a return of capital: not a dividend, not immediately taxable, reduces cost basis dollar for dollar, then becomes capital gain once basis reaches zero
• How to distinguish a distribution from earnings and profits (dividend) from a distribution in excess of earnings and profits (return of capital)
• The exam trap of basis reduction followed by larger capital gain upon sale, and why the Internal Revenue Service (IRS) always collects eventually