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Author: joelcorley Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35367  
Subject: Re: Hybrid/Other Annuities Date: 4/23/2014 5:29 PM
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TMFGalagan,

I wrote, BTW, the pass-thru rule on qualified dividends is a significant reason to never to buy something like PFF (iShares S&P US Preferred Stock Index Fund) in a taxable account. This ETF pools qualified and non-qualified income and passes it all through as non-qualified dividends. A fine strategy in a tax-advantaged account, but a poor one in a taxable account.

To which you replied, I believe this is inaccurate. iShares provides a breakdown of qualified/nonqualified divs for use on your tax return:

http://www.ishares.com/us/literature/tax-information/2013-qd......

For instance, here, PFF pays out almost 67% qualified dividend income, which you can claim on your tax return.

The more likely issue is that some *brokers* might not incorporate that information into their 1099s. But that's a broker issue, not an issue with the ETF structure itself.


I stand corrected.

Even so, a qualified dividend strategy is usually preferable (pun intended) in a taxable account. So while I might be wrong about the specifics, I'd still tend to avoid PFF and REITs in my taxable accounts because of the unqualified dividends and interest payments. With that said, I do have plenty of this stuff in my IRAs.

- Joel
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