what was before?Well, before now, there were just... dividends. Much easier. But wait, it gets worse! It used to be that if stock you owned was loaned out to, say, a short seller, and while it was in his possession a dividend was paid, he gave you a cash payment in place of the dividend. That's only fair, since it's your stock, not his. Those cash payments weren't really dividends, but the distinction was unimportant, since dividends and cash payments were both taxed as ordinary income. But now, dividends - the qualified variety, that is - get preferential tax treatment, and the distinction is important. If you get one of these cash payments, you get to pay the full, ordinary income tax rate on the payment, rather than the lower rate you would pay if you received a dividend. Bummer. But don't worry about this just yet - likely the IRS won't enforce this little quirk, because nobody quite knows what to do about it. Just another little tax twist brought to you by those fun-loving guys and gals on Capitol Hill.Lorenzo
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