FAQs

Do mutual funds distribute Qualified Dividends?

Mutual funds are able to pass through Qualified Dividend Income they receive to their shareholders.

Qualified dividends include actual dividends passed through from mutual fund holdings but does not include interest or short-term capital gains (despite the fact that these latter two items are also reported as dividend income).

 
Do synthetic preferred securities pay Qualified Dividend Income?

No.

Although synthetic preferred securities (QUIDS, QUIPS, SATURNS, TOPRS, MIPS, etc.) trade the same as equities, they are considered debt securities and pay “interest” for tax purposes. Therefore, the “interest” is not Qualified Dividend Income.

Do REITs pay Qualified Dividend Income?

Real estate investment trust (REIT) distributions can qualify for the lower dividend tax rate.

However, since a REIT must invest primarily in real estate assets (rather than qualifying corporate stock), it is unlikely that a significant portion of REIT distributions will qualify for the lower rates.

Check with the REIT directly for specific information regarding qualified dividend distributions.

 
Can Qualified Dividend Income be used to offset capital losses?

No.

Under the 2003 Act, Qualified Dividend Income can not be used to offset capital losses.

Only $3,000 of ordinary income can be offset by capital losses.