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Author: WPatch Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 78156  
Subject: Re: Retiring @ 55 Date: 10/16/2013 8:26 AM
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[I]Dividends from qualified corporations stock are allowed the preferred capital gains rate if they are held at least 61 days. (91 days for true preferred stock if more than one year's accrual are paid in one dividend.) It should be noted that must so-called preferred securities are "Hybrid" debt instruments, not qualifying regardless of holding period.

Joel Curley

For the curious, the preferred stock WPatch is talking about that do not qualify are typically issued by an investment trust, such as a REIT (Real Estate Investment Trust) or bank-owned financing arm. The investment trust is a pass-through entity, so the payments are effectively interest on the assets held by the trust. That's why they don't enjoy favorable tax treatment - you're paying the income taxes the trust doesn't pay.[/I]


Actually, REITs, as well as other entities classified as ICs under the Investment Company Act of 1940(open-ended mutual funds, closed end funds, unit investment trusts, true etfs), are not qualified corporations. Stock of investment companies can only pass thru qualified dividends if their investments are qualified corporations.
This is uncommon for REITs. Preferred stock of REITS and closed end funds do not pay qualified dividends.
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