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Capital Gains and Income

41 Managing gains and losses can help you save , taxes, can help you save gains and losses Managing capital defer taxes and obtain the highest after- yield on your . yield on your assets. the highest after-tax and obtain defer taxes This planning is very rates tax the various critical when considering (including the 3.8% Medicare Contribution Tax for certain taxpayers). Tax Contribution (including the 3.8% Medicare since the rate on -term capital gains can be as high as 40.8% in 2019 gains can be capital on short-term the rate since compared to the long-term capital gain rate of 23.8% for both 2019 and 2020 23.8% for both of to the long-term gain rate capital compared and 2020 (including the 3.8% Medicare Contribution Tax for certain taxpayers) Tax Contribution and 2020 (including the 3.8% Medicare

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Income and Dividend Dividend and Capital Gains Capital EisnerAmper 2020 Personal Tax Guide 180 daysof realizing thegains.TheQOFsmustinvest mustinvesttheircapitalgainsinaQOFwithin . from ,bonds,real estateorpartnership Gains canbederivedfrom anyinvestment,whether QOFs are theinstrumentsthatinvestinthesezones. (“QOZs”) are geographicareas thatneedimprovement; zones fund(“QOF”).Qualifiedopportunity opportunity gains iftheamountof thegainisinvestedinaqualified Under theTCJA, maydefertaxoncapital taxpayers | Qualified Opportunity Funds Qualified Opportunity Chart ***MAGI isAGI increased bythenetincome excludedfrom foreign incomeunderIRCSec.911(a). jointly; $461,701forheadof householdand$244,426for marriedfilingseparately. and $300,000formarriedfilingseparately).For2019,thethresholdshold; $500,000forsinglefilers; were $434,551forsingle;$488,851 formarriedfiling threshold amounts($600,000formarriedfiling jointly; $500,000forhead withincomeabovecertain of house- **The 20%taxrateappliestotaxpayers *For 2019thetoptaxrateforregular taxpurposesis37%. Married FilingSeparate Single &HeadofHousehold Widow(er) Qualifying & Joint Filing Married Filing Status Gain attributabletodepreciationontangiblepersonalproperty taxrate taxableatthe10%or15%ordinary Gains otherwise Gain attributabletodepreciationonrealproperty Collectibles, suchasartwork&preciousmetals Exceptions heldmore than12months to the20%taxrate onproperty AMT purposes Regular taxpurposes Long-Term Rate (Holdingperiodgreater than12months) AMT purposes Regular taxpurposes Short-Term Rate (Holdingperiod12monthsorless) Modified Adjusted Gross Income(“MAGI”)*** exceeds thethreshold amountfortheapplicablefilingstatus: Taxpayers are liablefortheadditional3.8%Medicare ContributionTax onnetinvestment incomeiftheir 4. CapitalGainTax Rates–2019 42 37%* • • | order toderivebenefitfrom thisplanningtechnique. tore-invest theentire gainin used. Itisnotnecessary ratherfundsmustbe invested directly intotheproperty; 90% of thecapitalintoQOZs. Themoneycannotbe • CapitalGainTax Rates imposed on your net income depending imposed onyournetinvestmentincomedepending additional 3.8%Medicare ContributionTax maybe As aresult of theAffordable Care Act(“ACA”), an  28% • • 25% 25% • 20%** 20%** • • Threshold Amount $ 125,000 $ $ 200,000 $ 250,000

15% 15% • • RETURN TORETURN TOC • 0% 0% Capital Gains and Dividend Income

 Comp and Losses and  Capital loss limitations that only allow you to deductCapital loss limitations that only allow gains against ordinary losses in excess of $3,000 of income. (If income, such as wages and the limit for each individual married filing separately, capital lossesis $1,500.) It should be noted that net income in other categories of cannot reduce Contribution Tax. calculating the Medicare Year-End Trading Strategies Trading Year-End Gains Realized Year-to-Date uting gains of $400,000). Your would be $78,000 ($390,000 capital gains tax would be $78,000 ($390,000 $400,000). Your gains of and also assumes that the top rates apply. and also assumes that of excess long-term gains at 20%). So your tax increase would be gains at 20%). So your tax increase excess long-term of The above example is exclusive of the Medicare Contribution Tax, Contribution Tax, the Medicare exclusive of The above example is Note: the long-term rate of 20% on the additional short-term gain of gain of 20% on the additional short-term rate of the long-term | capital gains or losses, youIf you have unrealized Tip 3 in the chapter on tax planning to Tax should refer to take additionalstrategies to help you decide whether But as this tip the year. the end of gains or losses before your gains and losses will of illustrates, the exact nature dictate which positions you should consider selling. | strategy to use, it is which year-end determining Before gains realized important year-to-date to compute your consider the following when you and losses. Make sure gains and losses: realized your year-to-date determining Date Trade theThe trade date, not the settlement date, determines gain or loss holding period and the year you recognize • $30,000 ($78,000 less the original tax of $48,000). You actually paid actually paid $48,000). You the original tax of $30,000 ($78,000 less $150,000. 43 6. Use the Netting Rule to Get the Best Results to Get the Best Netting Rule 6. Use the Tax Tip Tax RETURN TO TOC RETURN TO       Exclusion and rollover provisions on the sale of certain on the sale of provisions Exclusion and rollover assets. Sale of real estate that is subject to depreciation estate that is subject to depreciation real Sale of 25%. at a maximum rate of recapture 28% rate on the sale of collectibles, such as artwork28% rate on the sale of ETFs that invest in metals (including and precious metals). precious A netting rule that can flip the actual rate from 20% A netting rule that can flip the actual rate from gains (andto 37% (in 2019 and 2020) on long-term gains) since you must net for short-term the reverse one holding period against the excess losses from Tip 6). the other holding period (see Tax gains of Type of property sold. of Type 28% on assets held short-term. The AMT rate of upon your tax bracket. For more information on information upon your tax bracket. For more on taxhow this tax is computed, see the chapter As Chartrate overview. and 4 illustrates, for 2019 tax rates can apply to many different thereafter, capital gains, but the most important rates to 37% in 2019 tax rates of the maximum are remember assets held 12 months or and 2020 on net gains from and 20% on most assets held more less (short-term) the actual However, than 12 months (long-term). a capital can tax you pay on the sale of rate of than just how long you have held depend on more the asset, including: gains of $400,000. In 2019, your capital gains tax would be $48,000 $400,000. In 2019, your capital gains tax gains of capital gains of $390,000 (short-term losses of $10,000 and long-term $10,000 and long-term losses of $390,000 (short-term capital gains of with an unrealized short-term gain of $150,000 that you would like to $150,000 that you would like to gain of short-term with an unrealized • • • • • • sell, but are reluctant to pay the short-term capital gain rate of 37%. capital gain rate of the short-term to pay reluctant sell, but are ($240,000 of excess long-term gains at 20%). You also have assets also You gains at 20%). excess long-term ($240,000 of Since gains are netted, if you realized the gain you would have net the gain you realized netted, if you Since gains are $240,000, made up of short-term losses of $160,000 and long-term $160,000 and long-term losses of short-term $240,000, made up of Assume you determine that your year-to-date net capital gains are are net capital gains that your year-to-date Assume you determine EisnerAmper 2020 Personal Tax Guide as S&PIndexoptionsand regulated futures contracts Capital gainsandlosseson mark-to-market assetssuch Mark-to-market assets any entitiesinwhichyouare anownerorinvestor. of anydistributablecapitalgainsandlossesfrom distribution. You willneedtodetermine yourprojected to youwhetherornotactuallyreceive acash Scorporations, andLLCs, arepartnerships, taxable Gains andlossesfrom pass-through entities,suchas Pass-through entities distribution (seebelow). before anannounceddividend buy mutualfundsshortly itisusuallyinadvisableto an incometaxperspective, Note: also applies. 15% or20%.The3.8%Medicare ContributionTax rate in2019andbeyondare subjecttoratesof tax rates.However, mutualfundspayingoutqualifying income as dividendincomesubjecttotheordinary from moneymarketconstantdollarfunds,are treated dividends,suchas distributions andnon-qualifying date netcapitalgainorloss.Short-term capitalgain you considerthemwhencomputingyouryear-to- their largest distributionsinDecember, somakesure gains ratherthandividendincome.Manyfundsmake term capitalgaindistributionsthatare taxedascapital Dividends paidbymutualfundstypicallyincludelong- Mutual funddistributions similar contracts. incomefrom Sec. 1256contractsagainstprioryears’ dies; however, backsomelossesonIRC youcancarry are terminated whenthetaxpayer loss carryforwards indefinitely(butnotback)untilused.Capital forward are marriedfilingseparately).Excesslossesare carried incomeperyear($1,500ifyou can reduce yourordinary Only $3,000of capitallossesinexcessof capitalgains Excess capitallosses sales closedataloss. on thesaleof publiclytradedsecurities,exceptforshort Absent unusualcircumstances, andstrictlyfrom 44 disallowed underthoserules. you are required toadjustyourbasisforlosses sale transactionsoccurinthesameaccount.Therefore, required washsaleswhenthepurchase and toreport application of thewashsalerules. are only onForm 1099-B maynotreflect The basisreported are required tobereported. 1,2014 January Options grantedoracquired onorafter are covered securitiesifacquired beginningin2012. with adividendreinvestment plan,bothof which method isavailableandstockacquired inconnection investment companyforwhichtheaveragebasis acquired beginningin2011exceptstockaregulated Transactions.” Acovered securityincludesallstock 1099-B, “Proceeds Exchange from andBarter short-term. isgenerallydoneonForm Thereporting or losswithrespect tothesecurityislong-term or adjusted basisinthesecurityandwhetheranygain from thesaleof the thesecuritymustalsoreport broker whoisrequired thegross proceeds toreport provided thatinthecaseof acovered , every The Energy Improvement andExtensionActof 2008 | acquires orredeems thoseshares. in anaccounthandledbyacustodianoragentwho average costbasis.Theshares needtobeondeposit and prices,youcancalculatethegainorlossusingan If youacquire shares inamutualfundatvarioustimes | this chapter. these IRCSec.1256contracts,seethediscussionlaterin to-date capitalgainsandlosses.Forthetaxtreatment of should alsobeconsidered whendetermining youryear- ax Basis Reporting Requirementsax BasisReporting for verage Basisof MutualFund Shares Investors Investors T A   RETURN TORETURN TOC Capital Gains and Dividend Income

Are Taxable, Are Taxable, Exchanging mutual funds is generally considered a sale of a sale of Exchanging mutual funds is generally considered  Bewar Trap theMutualFund e of gain income of $20,000 (4,000 shares at $5 per share), reportable at $5 per share), on shares $20,000 (4,000 gain income of fund is in the same family of funds. fund is in the same family of the initial fund with potential capital gain or loss results, even if the new results, the initial fund with potential capital gain or loss when the fund is selling for $35 per share. You end up with capital You for $35 per share. when the fund is selling your 2019 return, even though the share has decreased since value has decreased even though the share your 2019 return, $20,000 by the increases But your basis in the shares your purchase. that you reported as income. Warning: Warning: be publicly traded.) You receive a contribution receive be publicly traded.) You security the value of deduction based on the fair market (subject to certain yet limitations based on your AGI), you never pay tax on the appreciation. if you front rewards even greater This can reap fund load a private foundation or a donor-advised securities to fund long-term with appreciated contributions. See the chapter on charitable future contributions for a detailed discussion. you bought the shares. Tip 7 shows, you end up paying tax on the gains, As Tax whether or not your position in the fund of regardless you have converted In effect, has appreciated. part of your initial investment into taxable income. rather than through directly owning stocks A benefit of when you realize a is that you can control deferring gains and losses, giving you the advantage of (For donations to private foundations, the stock must(For donations to private foundations, | a mutual fund may A capital gain distribution from by the fund before include significant gains realized 45

Even if They Are Automatically Reinvested Are Automatically Even if They Mutual Fund Distributions Fund Distributions Mutual  This assumes that the objective was to lower 7. Tax Tip Tax RETURN TO TOC RETURN TO   A I Charitable Giving Through GainsTax Capital void Taxes Your dentify Reduce Lotsto in the fund. For example, let’s say you purchased 4,000 shares of an of 4,000 shares you purchased say in the fund. For example, let’s equity mutual fund on September 1, 2019 at $50 per share. Just before Just before $50 per share. equity mutual fund on September 1, 2019 at per-share value. per-share fund since it simply increases the number of shares you own at a lower you shares the number of fund since it simply increases However, a distribution is taxable in the year made, even if reinvested is taxable in the year made, even if reinvested a distribution However, year-end, the fund makes a capital gain distribution of $5 per share $5 per share the fund makes a capital gain distribution of year-end, You can avoid paying capital gains tax on appreciated can avoid paying capital gains tax on appreciated You than one year securities that you have held for more if you use them to make your charitable contributions. | realized capital gains in the current year. It may have year. capital gains in the current realized prudent to accelerate gains in the current been more if year and postpone losses until the following year, in theit is anticipated that your tax rate will increase subsequent year. Note: Note: at a loss, generally sell the lowest cost lots first.at a loss, generally sell the lowest cost If you only want to sell part of your holdings of aIf you only want to sell part your holdings of of sell the lot withspecific stock, you typically want to the highest cost firstyou can report so that the lowest automatically sell the frequently brokers gain. However, their relative of lots that you bought first, regardless in your broker this mistake by instructing cost. Avoid sell the lots youadvance, in writing, that you want to cost, assuming with the highest have held long-term selling selling the position at a gain. If you are you are | Typically, distributions from mutual funds are reinvested in the fund. reinvested mutual funds are distributions from Typically, value in the not change your aggregate The distribution itself does EisnerAmper 2020 Personal Tax Guide estate planning. and exhausted theexclusion.See thechapterongift taxifyou have already tax exclusionorresult inagift $15,000 for2019,itwilleitherreduce yourlifetimegift exceeds If thetotalamountof toanyoneperson gifts forgiven loanwillbe treated asthoughyoumadeagift. it isnotreally aloan thatyouhavesimplyforgiven. A how longthedebtwasoutstanding.Butmakesure that the lossistreated as ashort-term lossregardless of However,year inwhichitbecomesentirely worthless. is similarlydeductibleasacapitallossattheendof the A non-businessbaddebt,typicallyanuncollectibleloan, some value. Shares of stockof manycompaniesinbankruptcyhave Note: take thelossinthatyear. the salebefore theendof theyear, youwillbeableto foranominalamount. Ifyoucomplete unrelated party test bysellingthesecurity(inabonafidesale)toan security.worthless You canavoidtheabsolute-no-value value, youwillusuallybeprevented from claimingitasa must haveabsolutelynovalue.Ifithasevennegligible on December31.To asecurity beconsidered worthless, term orshort-term, thesecurityisdeemedtobesold Fordetermining whetherthelossislong- worthless. treated asacapitallossintheyearitbecomestotally securityis your lossesthrough taxsavings.Aworthless youcanatleastrecover someof completely worthless, When asecurityornon-businessloanbecomes | or indexedfund. would beapassivelymanagedexchangetradedfund An alternative toanactivelymanagedmutualfund be availableinamutualfund. may sacrificesomeof thatmay theinvestmentdiversity tax. However, byhavingdirect of ownership stocksyou the taxongain,ortakinglossestominimizeyour ake Lossesfrom Securities Worthless and Bad Debts T  Do not confuse bankruptcy with worthlessness. Do notconfusebankruptcywithworthlessness. 46 can be carried back and/or forward underspecial rules. can becarriedbackand/or forward for maycreate orincrease anetoperatinglossthat lossinthesetypes ofA theft transactionsentered into loss. the deductibletheft the fictitiousincomemaybeincludedinamount of asincome, withdraw theamountpreviously reported income, andtheinvestordoesnotsubsequently the investorincludedamountinhisorhergross ofand thetheft, priortotheyearofyears discovery totheinvestorasincomein If anamountisreported there isareasonable prospect of recovery. or otherrecoveries andreduced byclaimsastowhich amounts withdrawn,ifany, reduced byreimbursements the arrangementplusanyadditionalinvestments,less arrangement isgenerallytheinitialamountinvestedin The lossresulting from afraudulentinvestment grossinvestor’s income. the claiminalatertaxableyearare notincludibleinthe deduction isreduced bysuchaclaim,recoveries on prospect of recovery. To theextentthatinvestor’s astowhichtheinvestorhasareasonable recovery is notcovered byaclaimforreimbursement orother theloss,provided the taxpayerdiscovers thattheloss arrangement isdeductibleinthetaxableyearwhich various limitations.Alossfrom afraudulentinvestment subjectto compensated byinsuranceorotherwise for lossessustainedduringthetaxableyearnot The Internal RevenueCodeallowsadeduction in thefraudulentarrangement(e.g.,aPonzi scheme). made from hadinvested amountsthatotherinvestors principal tothetaxpayer, butthesepaymentswere incomeor advisor madepaymentsof purported response torequests forwithdrawals,theinvestment orwhollyfictitious.Insomecases,in that were partially investment activitiesandresulting incomeamounts example, aninvestmentadvisormayhavereported loss from afraudulentinvestmentarrangement.For Unfortunately, sometimesexperiencea taxpayers | reatment of Lossesfrom Fraudulent Investment Arrangements T  RETURN TORETURN TOC Capital Gains and Dividend Income

  Long-T T Income Taxed at 0% Taxed Income Selling Short the Box Against erm CapitalGainsandDividend Taxes Save to Stock ransfer Appreciated or has a materially different stated interest rate stated interest has a materially different issuer or or maturity. You can transfer appreciated securities that you have securities can transfer appreciated You who to your child, or other beneficiary, held long-term is subject to a low income tax rate and then have the child sell the securities and pay no federal tax. The child | capital gains and qualifyingNet long-term dividend not taxed at be taxed are income that would normally all for taxpayers whose taxable income is below certain to taxpayers This rule applies with taxablethresholds. income that would otherwise be taxed at either 10% or this rule. application of 12% before | | the wash sale rule — the ”constructive of The reverse locking in the you from sale” rule — prevents any on a security without recognizing appreciation an identical security short.taxable gain by selling The sale and deemed to be a constructive two positions are security was gain as if the appreciated you must realize short the date of sold for its fair market value on the deferring the gain to you from preventing sale, thereby year. a future to close the shortAn exception to this rule allows you if you the tax year sale within 30 days after the end of position open and at risk for at keep your appreciated the shortleast 60 days following the close of sale. Since closing the short sale is based on the delivery you date, actually need to close the short sale earlier so that you within delivered have enough time to have the shares the 30 days. 47 wap to Realize Losses Realize to wap RETURN TO TOC RETURN TO   Use a S W    Double up on the position 31 days before selling at a before Double up on the position 31 days loss. Buy shares in a mutual fund (or an exchange-traded Buy shares or fund) that specializes in the same industry, Buy securities of another in the same Buy securities of or industry,

Loss CanDisallow Your ash Sale You may be holding losses in your bond portfolio You a loss and immediately purchase you can realize where somewhat similar bonds, yet avoid the wash sale rule. to as a bond swap because your This strategy is referred net position after is the sale and subsequent purchase similar to your position prior to the swap. For example, a substantially bond is not considered the replacement identical security (the wash sale test) if it has a different | • • • If you don’t want to risk being out of the position for to risk being out of If you don’t want than 61 days, consider the following alternatives: more | a loss on realizing from you sale rule prohibits The wash identical or a substantially if you buy the same a security to buy such a security) within 30 dayssecurity (or option you to be out of or afterbefore you sell it. This requires at an investment risk for those 61the position and/or yet buy a loss on the security realize days if you want to sale “test,” If you fail the wash growth. it back for future only when the replacement your loss will be realized security is sold. One planning technique available is to sell appreciated to sell appreciated One planning technique available is to utilize capital year in order securities in the current thereby immediately, losses and then buy back the stock sale rule does notsecuring a step-up in basis. The wash apply to gains. You can sell the alternative security or mutual fund after security or mutual fund can sell the alternative You to buy back securities in 30 days and use the proceeds if you prefer. your original company, EisnerAmper 2020 Personal Tax Guide and 40%short-term, regardless of theholdingperiod. contracts isautomaticallytreated as60%long-term typical capitalgainassets.The gainorlossonthese tax issuesrelated to thesecontractsare different than options anddealersecuritiesfutures contracts.The options (includingstockindexoptions),dealerequity contracts, foreign currency contracts,non-equity IRC Sec.1256contractsincluderegulated futures | of thedifferent typesof charitable trusts. charitable contributionsforamore detaileddiscussion will gotoacharityyoudesignate.Seethechapteron The remainder amountattheendof thetrust’s term the taxandtrustwillmakeannualpaymentstoyou. a charitableremainder trust.Bydoingso,youwilldefer to sellbecauseof thecapitalgainstax,considercreating If youhaveappreciated securitiesthatyouare reluctant | rate onhisorhercapitalgains. thetaxpayertoa0%tax tax bracket,thereby qualifying of upto$38,700in2019andstillbethe12%for rate of zero. Asingletaxpayercanhavetaxableincome betaxedat12%(for2019)asbeinga otherwise of aprovision thattreats capitalgainincomethatwould would paynotaxonthe$30,000gain.Thisisbecause only haswagesfrom asummerjobof $4,000.Heorshe age 19(whoisnotafull-timestudent),andthechild unrealized gainsof $30,000toyoursinglechildover As anexample,assumeyoutransfersecuritieswith estate planning. and be considered, asdiscussedinthechapterongift chapter. However, taxissuesmust keepinmindthatgift on yourtaxrate,asdiscussedintherateoverview 24) toavoidthekiddietaxrulethatassessesbased must beoverage19(orifafull-timestudent, ital GainsTax onHighly RS Sec.1256Contracts Appreciated Securities I Defer Cap   48 real estateactivities. assets, seethediscussioninchapteronpassiveand Ifyouare consideringsellingany of these partnership. a privatelyheldcorporationoraninterest inanLLC or sales of non-publiclytradedproperty, suchasstockin considered forreal estatesales,itcan alsoapplyto to realize againonthesaleof anasset.Whiletypically tax-efficientmethod An installmentsalecanbeavery | previous year. gain orlossalready treated asrealized attheendof the as ifsold,withanadjustmenttoyourtaxbasisforthe the contractsatyear-end istaxableinthecurrent year Tax) Anyunrealized taxpayers. gainorlosson forcertain considering theadditional3.8%Medicare Contribution 1256 gainsfor2019and2020is26.8%(30.60%when Thus, themaximumeffectivefederaltaxrateonIRCSec. property. Unlikeinstalmentsales, youcannot“optout”of isthesameassurrendered replacement property Note: discussion of like-kindexchanges. passive andreal estateactivitiesforamore detailed on orbefore December 31,2018.Seethechapteron being exchangedorreceived isexchangedorreceived an exceptionforanyexchangeifeithertheproperty December 31,2018.However,completed after there is is notheldprimarilyforsale,effectiveexchanges of gainforlike-kindexchangesof that real property investment property. TheTCJA limitsthenonrecognition rule appliedforthesaleof aswellother real property received. For2019,this other boot(“unlike”property) in theexchange,excepttoextentof anycashor thatyou havereceived gain untilyouselltheproperty same nature orcharacter. You don’tpaytaxesonany thathasthe forotherproperty by exchangingproperty The like-kindexchangeruleallowsyoutodefertaxes | nstallment Sale Reporting Benefits nstallment SaleReporting RS Sec.1031Like-Kind Exchanges I I   Like-kind exchange reporting is mandatory if the ifthe ismandatory Like-kind exchangereporting RETURN TORETURN TOC Capital Gains and Dividend Income

 I    market mutual funds and bond funds.Money market mutual trusts (“REITs”). Real estate investment dividends if your in lieu of you received Payments to a customer (as part a shares loans your broker of short paid to the short and dividends are sale) sale the shortbuyer before sale is closed. RS Sec.1035Exchange | gain or loss shall be that no The law provides annuity contract for an of on the exchange recognized is for another annuity contract. The exchange treatment exchanged one insurance individuals who have merely policy for another which better suits their needs. The an annuity of exchange without gain or loss recognition contract for another annuity contract is limited to cases the obligee the same personpersons or are where or obligees under both the original and exchanged contracts. • • • A qualified foreign is generally a foreign corporation is generally a foreign A qualified foreign a of corporation that is eligible for the benefits with the U.S. that income tax treaty comprehensive In program. information includes an exchange of as a qualified corporation is treated addition, a foreign traded on corporation if its stock is readily foreign U.S. For thisan established securities market in the as so traded if an will be treated purpose, a share backed by the American Depository Receipt (“ADR”) a foreign from is so traded. Dividends received share investment corporation that was either a foreign investment company company or a passive foreign distribution or the (“PFIC”) either for the year of qualified dividends eligible not year are preceding for the 15% or 20% rates. Dividend income that is generally not eligible for the not eligible income that is generally Dividend at your ordinary taxed rates, and therefore 15% or 20% 2019 and 37% or 40.8% in rate (as high as income tax Contribution additional Medicare the of 2020 inclusive from: includes dividends received Tax) 49 RETURN TO TOC RETURN TO  Qualified   You must hold the stock for more than 60 days must hold the stock for more You the during the 121 days beginning 60 days before 181 to 90 days out of ex-dividend date. This increases rate is days for certain stock. The reduced preferred holding if you are not available for dividends received shortan equivalent offsetting position in the same security. The dividends must be paid by either a domesticThe dividends must be paid by either corporation (as corporation or a qualified foreign defined below). Income Dividend • • | by an individual Qualified dividends received taxed 31, 2019 are December through shareholder at 15% and 20% for taxpayers who fall into the 37% the Medicare exclusive of tax bracket. These rates are 3.8%. The following requirements of Contribution Tax must be satisfied: and restrictions like-kind exchange reporting.like-kind a like-kind exchange While properties, swap of have to be a simultaneous does not gain will or the entire meet two time limits you must The firstbe taxable. 45 days from is that you have limit property relinquished the date you sell the to identify The second limit is that property. potential replacement property and thethe replacement must be received no later than 180 days afterexchange completed the property the exchanged or the due date (withsale of in for the tax year the income tax return extensions) of propertywhich the relinquished was sold, whichever property must be The replacement received is earlier. substantially the same as the property identified within the 45-day limit described previously. Dividends taxed at 15% or 20% are not investment Dividends taxed at 15% or 20% are expense the investment interest income for purposes of just as is the case for net long- limitation. However, gains, you can elect to tax the dividends at capital term ordinary this limitation some or all of rates and eliminate See the interest. investment on the deduction of expense. discussion in the chapter on interest EisnerAmper 2020 Personal Tax Guide exchange. asatax-free transfer qualifies(orisintendedtoqualify) exchange isnottakenintoaccountifthesubsequent of of eithercontractinvolvedinan alloraportion on thedateof thetransfer. Asubsequentdirect transfer or more lives)isreceived duringthe180daysbeginning annuity foraperiodof ormore tenyears orduringone if noamount(otherthananreceived asan be treated asatax-free exchangeunderIRCSec.1035 annuity inexchangeforasecondcontractwill ofof thecashsurrender aportion valueof anexisting Under RevenueProcedure 2011-38,thedirect transfer 50 RETURN TORETURN TOC