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The Buckle (BKE) issued its normal Jan dividend in Dec and also a special dividend in Dec. My broker reported these on a 1099-MISC, but I think they should be qualified dividends on the 1099-DIV. Previous dividends are qualified dividends on the 1099-DIV. How do I confirm the correct status for these dividends? I couldn't find anything on the company web site. Thanks.

Jeff
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The Buckle (BKE) issued its normal Jan dividend in Dec and also a special dividend in Dec. My broker reported these on a 1099-MISC, but I think they should be qualified dividends on the 1099-DIV. Previous dividends are qualified dividends on the 1099-DIV. How do I confirm the correct status for these dividends? I couldn't find anything on the company web site. Thanks.

Jeff

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One possibility: Does this relate to dividends on stock sold short?
That is reportable as miscellaneous income, and it wouldn't be an issue specific to the company.

Bill
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The stock was bought long in August 2012 and has not been sold. The Oct dividend shows on the 1099-DIV as qualified.
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The stock was bought long in August 2012 and has not been sold. The Oct dividend shows on the 1099-DIV as qualified.
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OK, you didn't sell it, BUT -
You MAY have an agreement with your broker (and if you have a margin account, you probably do) whereby your broker can use the shares in your account as the shares that somebody else sells short. In that case, the short seller has to reimburse you for the dividends, but the buyer is the party who gets the qualified dividend treatment. To you, it's ordinary income.

That MAY be what happened.

Bill
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OK, you didn't sell it, BUT -
You MAY have an agreement with your broker (and if you have a margin account, you probably do) whereby your broker can use the shares in your account as the shares that somebody else sells short. In that case, the short seller has to reimburse you for the dividends, but the buyer is the party who gets the qualified dividend treatment. To you, it's ordinary income.

That MAY be what happened.


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I meant to add:
Was there any explanatory info. on the 1099-MISC as to what they report there? If not, I'd just call the broker and ask.

I looked in Mergent's 2012 Dividend Guide, and there was nothing different indicated about the 4th qtr. payment, except for the special dividend amount.

Bill
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The broker is saying they are payments in lieu, but the account is not a margin account nor did I sign any lending agreement.

An 8-K filed by the company says one is a cash dividend and the other is a special cash dividend. I am waiting for a call back from the company investor relations office (left voice mail).

Where can I find the Mergent's guide? I found updates on their website, but not the main document.
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The broker is saying they are payments in lieu, but the account is not a margin account nor did I sign any lending agreement.

Maybe you did, in the fine print somewhere, the same time you agreed to submit disputes to arbitration.

And "payments in lieu" (of dividends) are the situation I described earlier. Although usually you see the "in lieu" phrase regarding fractional shares.

Where can I find the Mergent's guide? I found updates on their website, but not the main document.

It's a subcription product. It won't tell you anything you don't already know, in your case. I was just looking out of curiosity.

Bill
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The broker is saying they are payments in lieu, but the account is not a margin account nor did I sign any lending agreement.

Almost every brokerage account is a margin account. That is the standard account type because it offers the broker another way to make money (while keeping your fees low). Brokers often borrow shares from their clients to lend to others. They collect interest on the loan, but usually don't pass that interest on to the client (you) who provided the shares. You need to look at the language of the customer agreement you signed when you opened the account.

Some brokers used to maintain two separate accounts for each client: a cash account and a margin account. You could request that shares be held in the cash account, which meant that they couldn't be lent out. You also couldn't borrow against the cash account. I don't know if that's current procedure.

Getting back to your situation, if your broker lent your shares to a third party and a dividend was paid during the loan period, it is properly reported to you as a payment in lieu of a dividend on Form 1099-MISC. The income is reported on line 21 of Form 1040 and is not eligible for capital gains tax rate treatment.

Ira
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I have the answers.

First, what really happened in my situation. The broker missed the dividend payments, probably because they were out of cycle, so they made a payment in lieu instead of the qualified dividend it should have been. To correct this they are issuing an additional payment of 33% of the dividend payments to cover both the additional tax from the incorrectly reported payments and the tax on the additional payments. Apparently this is easier than issuing a corrected 1099 and fairly common. The net is I actually come out a little ahead.

Second, there seems to be some significant misunderstanding of when brokers can lend your shares. The federal laws governing this are quite restrictive. There must be a separate agreement unless you bought the shares using a margin loan. Just having a margin account is not sufficient.

Jeff
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There must be a separate agreement unless you bought the shares using a margin loan. Just having a margin account is not sufficient.

I believe it's not just if you bought them with a margin loan, but rather if you have a margin loan with them as collateral. (ex. if I have stock A in my account, and I buy stock B using just margin, both A and B could be lent. Or if I have stock A, get cash from the broker as a margin loan, then A could be lent out)

But after a little research - looks like I'm going by what Scottrade does:

http://beta.fool.com/beatlesforever/2012/06/04/shortlending/...
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