Why aren't ETF dividends qualified?

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Why aren't ETF dividends qualified?

Postby Sandy2 » Fri Mar 15, 2013 4:08 pm

SPY, for example, dividends are listed as ordinary,non qualified on 1099. But dividends from the individual stocks would be qualified.
Thanks for clarification, if anyone knows the answer.
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Re: Why aren't ETF dividends qualified?

Postby livesoft » Fri Mar 15, 2013 4:28 pm

Check that your broker did the right thing. Many of my ETF dividends are qualified, but I do not own SPY. I own other things.
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: Why aren't ETF dividends qualified?

Postby hsv_climber » Fri Mar 15, 2013 4:34 pm

Holding period?
How long did you hold/own SPY?
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Re: Why aren't ETF dividends qualified?

Postby Epsilon Delta » Fri Mar 15, 2013 5:21 pm

Is this a margin account? If your broker lent out your shares you may have gotten "payments in lieu of dividends" instead of "dividends". Payments in lieu are not qualified.
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Re: Why aren't ETF dividends qualified?

Postby Doc » Fri Mar 15, 2013 7:22 pm

Sandy2 wrote:SPY, for example, dividends are listed as ordinary,non qualified on 1099. But dividends from the individual stocks would be qualified.
Thanks for clarification, if anyone knows the answer.


Many times the dividend qualification changes some time after the end of the year. SPY for example in 2012 had 86% of its non-qualified dividends reclassified to qualified. Some brokers show you that this happened and some don't. It depends on when the ETF reports the change and when your 1099 is issued. (You should get the right number in the end.) You also have the problem of dividends declared in one year but paid in the next. These are taxable in the prior year if paid with 30 (31?) days into the new year. This may also be possible explanation for what you are seeing. The late December SPY dividend declaration falls in this category.
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Re: Why aren't ETF dividends qualified?

Postby Sandy2 » Sat Mar 16, 2013 11:13 pm

Uh oh. Now I am more confused than before.
The broker is Schwab.
The holding period is >1 year.
It is not a margin account.

There must be a place to look this up for a specific ETF. VEU was listed similarly but I thought maybe international was different.

Thanks for thinking it through with me. I will dig harder.
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Re: Why aren't ETF dividends qualified?

Postby livesoft » Sat Mar 16, 2013 11:27 pm

Here you go: link to PDF
page 19
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: Why aren't ETF dividends qualified?

Postby Doc » Sun Mar 17, 2013 11:32 am

Sandy2 wrote:Uh oh. Now I am more confused than before.
The broker is Schwab.
The holding period is >1 year.
It is not a margin account.

There must be a place to look this up for a specific ETF. VEU was listed similarly but I thought maybe international was different.

Thanks for thinking it through with me. I will dig harder.


The "first" page on Schwab's 1099 DIV has the net dividends qualified, ordinary , foreign tax etc. Several pages later (p 14 on my 1099) it gives the adjustments that occurred after year end. Vanguard does the same thing but with a little different format in their detail section.
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