What's the holding period to receive qualified dividend treatment

Holding Period for Qualified Dividends

To qualify for the reduced tax rate on dividends, commonly referred to as "qualified dividends," an investor must meet specific holding period requirements. The Internal Revenue Code (IRC) stipulates that:

- For common stock, the investor must hold the shares for more than 60 days during the 121-day period that begins 60 days before the ex-dividend date.

- For preferred stock, the holding period is more than 90 days during the 181-day period that begins 90 days before the stock's ex-dividend date if the dividends are due to periods totaling more than 366 days.

These holding periods ensure that the investor has a significant period of investment risk and is not merely taking advantage of the tax benefit without a genuine investment in the stock.

Please note that the provided information chunks do not directly address the specific holding period for qualified dividends. However, the general rules for holding periods and treatment of dividends can be found in various sections of the IRC, such as 26 U.S. Code § 1059 and 26 U.S. Code § 562, which discuss the treatment of extraordinary dividends and rules for dividends paid deductions, respectively. For the most accurate and detailed information regarding holding periods for qualified dividends, one should refer to 26 U.S. Code § 1(h)(11), which defines qualified dividends and the applicable holding periods.

It is important to maintain awareness of any changes or updates to tax laws that may affect the treatment of dividends, as these can impact the holding period requirements and the tax rate applied to dividends received by investors. For the latest tax rulings and bulletins, the Internal Revenue Bulletin is a valuable resource and can be accessed online at the IRS website.

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Sources:

26 U.S. Code § 246 - Rules applying to deductions for dividends received 26 U.S. Code Chapter 1 - NORMAL TAXES AND SURTAXES 26 U.S. Code Subchapter B - Computation of Taxable Income 26 U.S. Code Part VIII - SPECIAL DEDUCTIONS FOR CORPORATIONS 2023-12-11

26 U.S. Code § 1059 - Corporate shareholder’s basis in stock reduced by nontaxed portion of extraordinary dividends 26 U.S. Code Chapter 1 - NORMAL TAXES AND SURTAXES 26 U.S. Code Subchapter O - Gain or Loss on Disposition of Property 26 U.S. Code Part IV - SPECIAL RULES 2023-12-11

26 U.S. Code § 562 - Rules applicable in determining dividends eligible for dividends paid deduction 26 U.S. Code Chapter 1 - NORMAL TAXES AND SURTAXES 26 U.S. Code Subchapter G - Corporations Used to Avoid Income Tax on Shareholders 26 U.S. Code Part IV - DEDUCTION FOR DIVIDENDS PAID 2023-12-11

Internal Revenue Bulletin: 2004-10 2004-03-07

Internal Revenue Bulletin: 2003-50 2003-12-14