D must be paid out of earnings to receive preferred

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d) Must be paid out of earnings to receive preferred tax treatment e) Subject to complex limitations, U.S. corporations generally may effectively exclude 70% to 100% of dividends from income by  claiming a “dividends-received deduction.”  In addition, dividends paid to a U.S. recipient in respect of non-U.S. shares may be  subject to withholding at source.  Such withholding may be subject to reduction/modification by applicable tax treaties.  Long Term  Capital Gain Income Source Pension Funds (c) Corporations (b) Individuals (a) 15.00% 35.00% N/A Short Term Capital Gain 35.00% 35.00% N/A Dividend Income 15.00%  (d) 35.00%  (e) N/A Interest Income 35.00% 35.00% N/A   Investment Interest Expense Generally deductible Generally deductible against UBTI (see fn) Generally deductible to the extent of investment income 1010271-Cor-10
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0903270-Col-MBA-18-19 10 Taxation of Exchange Traded and  OTC Options Buy Options  that are Never  Physically  Settled Sell Options  that are Never  Physically  Settled Long Call (Put)  Exercised Short Call  (Put) Assigned Listed or OTC  Options on  Individual  Stocks or ETFs Type of gain/  loss depends  on holding  period STCG/L  Option premium  increases  (reduces) price  of stock  purchase (sale) Option premium  increases  (reduces) value  of stock sale  (purchase) OTC Options on  Indices Type of gain/  loss depends  on holding  period STCG/L  Not applicable Note: Rules above do not apply to Exchange Traded Broad Based Index Futures and Options 1010271-Cor-10
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0903270-Col-MBA-18-19 11 Futures and Index Options – 1256 Contracts A Hedge Fund takes  long and short  positions on the S&P  500 and usually  closes them within a  few days.  Should it  trade ETFs or  futures? A young individual in  a high tax bracket,  saving for retirement,  wants to invest in the  S&P 500. What strategy would  you recommend? “1256” contracts include exchange-traded stock index  futures, broad-based index options, and options on index  futures They are marked-to-market at year-end for tax purposes  and any gain or loss is treated at 60% long-term and 40%  short-term, irrespective of the holding period Over-the-Counter (OTC) index options are treated the same  as single-stock options for tax purposes Advantages Ability to sell short and  obtain partial long-term  capital gain treatment. Holding period irrelevant  for long-term/short-term  capital gain treatment. Disadvantages Unable to qualify for  100% long-term capital  gain treatment.
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  • Fall '06
  • ZURACK,MARK

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