Post by fastwalker on Oct 30, 2004 23:20:43 GMT -5
;DThere also is a holding requirement to qualify for the new dividend tax rate.
60 days prior to the ex-date.
Here is an article that explains it further.
You must own the stock 61 or more days during a 120-day period starting 60 days before the stock's "ex-dividend" date.
Got that? If not, let's try an example.
Let's say that Dividends R Us, Inc. declares a $1.00 per share dividend for all shareholders who own the stock as of Dec. 10, 2003.
That date is referred to as the "record date," which means that you must be on Dividend R Us's books as a shareholder of record to receive that dividend.
Two business days before the record date, Dec. 8, Dividend R Us would begin to trade "ex-dividend," which means if you buy the stock on or after that date, you won't get the dividend.
Of course, if the dividend is a significant amount, then the stock price will typically begin to move up by the amount of the dividend as the ex-dividend date nears and then the price would typically drop by the amount of the dividend -- $1.00 a share in the case of Dividends R Us -- after the ex-dividend rate to reflect the fact that purchasers won't get the dividend.
So what's all this have to do with tax rates? Well, our lawmakers didn't want someone buying the stock just before its ex-dividend date to get a dividend that would be taxed at a 15 percent rate (or lower for low tax-bracket investors) and then selling immediately afterwards when the stock's price had dropped. That would create a short-term capital loss that could be used to reduce income that would be taxed at a higher rate.
So Congress set the condition that to qualify for the 15 percent or lower dividend tax rate, you must own the stock for at least 61 days during the 120-day period starting 60 days before the ex-dividend date. So, in our example, that would mean you would have to own Dividend R Us stock for 61 or more days during the period running from Oct. 9 through Feb. 5, 2004.
60 days prior to the ex-date.
Here is an article that explains it further.
You must own the stock 61 or more days during a 120-day period starting 60 days before the stock's "ex-dividend" date.
Got that? If not, let's try an example.
Let's say that Dividends R Us, Inc. declares a $1.00 per share dividend for all shareholders who own the stock as of Dec. 10, 2003.
That date is referred to as the "record date," which means that you must be on Dividend R Us's books as a shareholder of record to receive that dividend.
Two business days before the record date, Dec. 8, Dividend R Us would begin to trade "ex-dividend," which means if you buy the stock on or after that date, you won't get the dividend.
Of course, if the dividend is a significant amount, then the stock price will typically begin to move up by the amount of the dividend as the ex-dividend date nears and then the price would typically drop by the amount of the dividend -- $1.00 a share in the case of Dividends R Us -- after the ex-dividend rate to reflect the fact that purchasers won't get the dividend.
So what's all this have to do with tax rates? Well, our lawmakers didn't want someone buying the stock just before its ex-dividend date to get a dividend that would be taxed at a 15 percent rate (or lower for low tax-bracket investors) and then selling immediately afterwards when the stock's price had dropped. That would create a short-term capital loss that could be used to reduce income that would be taxed at a higher rate.
So Congress set the condition that to qualify for the 15 percent or lower dividend tax rate, you must own the stock for at least 61 days during the 120-day period starting 60 days before the ex-dividend date. So, in our example, that would mean you would have to own Dividend R Us stock for 61 or more days during the period running from Oct. 9 through Feb. 5, 2004.
