How can I tell if a dividend should be qualified or not?

A dividend being qualified or not is determined by a basic formula: If the shares are owned for more than 60 days during the 121-day period that begins 60 days before the ex-dividend date, then the dividend is qualified; otherwise it is not.

If you own a common stock (Any time you buy shares in a company such as Apple, Home Depot, Walmart, etc. this is considered a common stock) then it's very easy to tell when something will be qualified or not; if you bought the stock far enough in advance of the ex-dividend date, and have held on to it long enough afterwords, then the dividend will be qualified.

For Mutual Funds, ETFs, REITS, or the broad category we call "Other", you're still bound by the same rules, but so are they. If they buy or sell a security too close to the ex-dividend date, then it won't be qualified for them, or for your club. Since you, as the holder, won't necessarily know what the fund has bought and sold, the Mutual Fund is required to report the qualified amount of the dividends that they pass on, using Form 1099 DIV.

This leads to the question of "How can I make adjustments to a dividend so it's qualified/non-qualified status matches the broker records"


If you have run into a case where one of the club securities has reclassified a dividend, please see our FAQ at:
https://www.iclub.com/faq/Home/Article?id=504

Or, as part of our Closing the books for the year Primer at:
https://www.iclub.com/faq/Home/Article?id=445


Checking your records

For most securities, the only way to change if a dividend is qualified or not is to adjust either the date of the dividend, or the date of the ex-dividend date that was used when the dividend was entered.

First, we suggest you check the Security Dividends report (Reports > Occasional > Security Dividends). This report will show whether each dividend is qualified or not, and can be useful for figuring out which dividends might need to be adjusted.

Next, check the dividend and ex-dividend dates that the company used. If your broker statement does not include the ex-dividend dates, you can use Stock Central to retrieve them:

Go to https://www.stockcentral.com
Click on TOOLS > RESEARCH LINKS.
Once you're on this page, enter a ticker in the upper right and click GO. Then click on the link labeled VIEW DIVIDENDS under the company profile. This will display all dividends with corresponding ex-dividend dates.

 

Common stocks:

For common stocks, once you know the dividend and ex-dividend dates, you can make adjustments to what is in your club accounting records

1. Click the ACCOUNTING Tab near the top of the page.
2. From the accounting page, click the heading on the left hand side of the page for the type of transaction you're looking for (SECURITIES, MEMBERS, or CASH ACCOUNTS) to get to the portfolio or summary page.
3. On the portfolio or summary page, click the VIEW/EDIT TRANSACTIONS link on the left hand side of the page.
4. By default, the system will show the last twelve months of transactions. If you need to see a different range of dates, change the FROM date in the Show Transactions box, and click the SUBMIT button.
5. When you have the correct date range, click on the one or two word description of the transaction (Buy Security, Deposit Cash, Expense, for example) to be taken to the transaction description.
6. On the transaction description page, click EDIT, and then make changes to the date or ex-dividend date, as needed.

 

 

All Other Securities:

For any other security, you will not know if a dividend is qualified or not until you receive information from the broker at the end of the year. As part of your year-end procedure, you will need to correctly identify all Mutual Funds, REITs, and other securities (Limited and Publicly Traded Partnerships, etc.). Once the security is correctly marked (as described below), you will then have the option to enter a the qualified amount when completing the end of year allocation.

In myiclub.com:
Select ACCOUNTING > SECURITIES > UPDATE SECURITY SETTINGS.
Click the Edit link next to each security you need to change.
Select the type of security (Choose 'Other' if you're not sure)
Click the SUBMIT button to save the changes.

In Club Accounting 3:
Select SECURITIES, double-click on each security in turn, and select the appropriate TYPE OF SECURITY (If you're not sure, simply select 'Other'), then click OK.

 

NOTE: Making the changes listed above will not automatically make dividends qualified or non-qualified. After making the changes to the security, you must perform the year-end allocation:

 

Allocating In myiclub.com:
Select ACCOUNTING > UTILITIES > ALLOCATE INCOME AND EXPENSES.

Use the drop-down menu to select the year of allocation, and then click Yes to begin the allocation.

On the following screen, any stock that has been adjusted, and which received dividends will now show up. You will see the total dividends, and be asked to enter the qualifying amount; if you leave the Qualifying Dividend amount blank, then the dividends for that security will be marked as non-qualified for that year.
You may also see a section titled 'Unrecap. Sec. 1250 Gain'. If the total shown is zero, you do not need to make any entries. If not, please check your 1099 for any entries listed as "Unrecaptured Sec. 1250 Gain", and enter them as well.

Click OK, and the allocation will complete.

 

Allocating In Club Accounting 3:
From the Tools menu, click ALLOCATE INCOME AND EXPENSES.

Use the drop-down menu to select the year of allocation.

Under the heading 'Enter Additional 1099-DIV Information, any stock that has been adjusted, and which received dividends will now show up. You will see the total dividends, and be asked to enter the qualifying amount; if you leave the Qualifying Dividend amount blank, then the dividends for that security will be marked as non-qualified for that year.

You may also see a box titled 'Unrecap. Sec. 1250 Gain'. If the total shown is zero, you do not need to make any entries. If not, please check your 1099 for any entries listed as "Unrecaptured Sec. 1250 Gain", and enter them as well.

Click OK, and the alloaction will complete.

 

More Information:

For more on ex-dividend dates, see this page on the SEC's web site:
https://www.sec.gov/answers/dividen.htm

 

More info on tax law change and why it affects Club Accounting:
https://www.iclub.com/clubs/newsletter/newsletter_article.aspname=n_20030812