Описание
HIGHER RATE S ON SOME GAINS AND DIVIDE NDS
Unfortunately, the preferential 0 percent/ 15 percent/ 20 percent rates do not apply to all types of longterm capital gains and dividends. Specifically as follows:
The reduced rates have no impact on investments held inside a tax-deferred retirement account
(traditional IRA, Keogh, SEP, solo 401(k), and the like). So, the client will pay taxes at the regular
rate (which can be as high as 39.6 percent) when gains accumulated in these accounts are withdrawn
as cash distributions. (Gains accumulated in a Roth IRA are still federal-income-tax-free as long as
the requirements for tax-free withdrawals are met.)
Clients will still pay taxes at their higher regular rates on net short-term capital gains from
investments held for one year or less. Therefore, if the client holds appreciated stock in a taxable
account for exactly one year, he or she could lose up to 39.6 percent of the profit to the IRS. If he or
she instead holds on for just one more day, the tax rate drops to no more than 20 percent. The
moral: selling just one day too soon could mean paying a larger amount of one s profit to the taxing
authorities.
Key point: For tax purposes, the client s holding period begins the day after he or she acquires
securities and includes the day of sale. For example, if your client buys shares on November 1 of this
year. The holding period begins on November 2. Therefore, November 2 of next year is the earliest
possible date he or she can sell and still be eligible for the reduced rates on long-term capital gains.
(See Rev. Ruls. 66-7 and 66-97.)
IRC Section 1231 gains attributable to depreciation deductions claimed against real estate properties
are called un-recaptured IRC Section 1250 gains. These gains, which would otherwise generally be
eligible for the 20 percent maximum rate, are taxed at a maximum rate of 25 percent [IRC Section
1(h)(6)]. The good news: any IRC Section 1231 gain more than the amount of un-recaptured IRC
Section 1250 gain from a real property sale is generally eligible for the 20 percent maximum rate on
long-term capital gains. The same treatment applies to the deferred IRC Section 1231 gain
component of installment note payments from an installment sale transaction.
Key point: Distributions from Real Estate Investment Trusts (REITs) and REIT mutual funds may
include some un-recaptured IRC Section 1250 gains from real property sales. These gains, which are
taxed at a maximum rate of 25 percent, should be separately reported to the investor and entered on
the appropriate line of the investor s Schedule D.
The 28 percent maximum rate on long-term capital gains from sales of collectibles and QSBC stock
remains in force [IRC Section 1(h)(5) and (7)].
The reduced 0 percent/ 15 percent/ 20 percent rates on dividends apply only to qualified dividends paid
on shares of corporate stock [IRC Section 1(h)(11)]. However, lots of payments that are commonly called
dividends are not qualified dividends under the tax law. For instance,
dividends paid on credit union accounts are really interest payments. As such, they are considered
ordinary income and are therefore taxed at regular rates, which can be as high as 39.6 percent;
dividends paid on some pre
underlying bundles of corporate bonds. So clients should not buy preferred shares for their taxable
accounts without knowing exactly what they are buying;
mutual fund dividend distributions that are paid out of the fund s short-term capital gains, interest
income, and other types of ordinary income are taxed at regular rates. So, equity mutual funds that
engage in rapid-fire trading of low-dividend growth stocks will generate payouts that are taxed at up
preferred stock issues that are actually publicly traded “wrappers” around
Детали
- Год издания
- 2018
- Format