qualified dividends -- is it a choice to qualify dividends?

[SandyG19]

Hello!

Usually, it's advantageous to classify dividends as qualified.  But if the dividend is foreign, it may be better to not qualify the dividend and instead take the foreign tax credit.  I have two sets of the same foreign dividend- If one set is unqualified and the other one is qualified, I get the best results.  Can I do that?  Classify one set as qualified and another set as unqualified?

[ThomasM125]

You don't have an option to treat dividends as qualified or not, they are either qualified based on their properties or they aren't.

Basically, they have to be paid by US corporations and the underlying investment must have been held for more than 60 days. You can read more here:

Qualified Dividends

[SandyG19]

Thanks for your reply, but a strategy in getting the best overall deal on taxes with the foreign tax credit is to see if classifying dividends as nonqualified is better. 

"In summary, when a taxpayer has foreign-source qualified dividend income with foreign tax paid on the income, the tax adviser may need to test the tax return computations under the above two scenarios, i.e., qualified dividend income scenario versus investment income scenario, to determine which results in the lower overall tax burden."  https://protaxconsulting.com/blog/maximizing-foreign-tax-credit/

So, it does seem to be a choice.  Also, foreign stocks can generate qualified dividends if they have " stock for which the dividend is paid is readily tradable on an established securities market in the United States." 

But it does seem odd to classify the same stock from one brokerage firm as qualified and from another as unqualified.  But doing so helps to decrease the taxes substantially overall because of the foreign tax credit calculations. The "sweet" spot is to reclassify only the stocks on one brokerage and not another.

[Mike9241]

where in the tax laws did you read that you can reclassify qualified dividends as nonqualified?

[SandyG19]

Where have you seen in the tax law saying that it's mandatory to classify as qualified? Please share because this is confusing and it does seem to be a choice.

Something that may be of interest that I added to my response but it's here too:

"In summary, when a taxpayer has foreign-source qualified dividend income with foreign tax paid on the income, the tax adviser may need to test the tax return computations under the above two scenarios, i.e., qualified dividend income scenario versus investment income scenario, to determine which results in the lower overall tax burden."

https://protaxconsulting.com/blog/maximizing-foreign-tax-credit/

[SandyG19]

Where is the law or rule that says it's mandatory?  It's usually advantageous but seems to be a choice.  From an online website that discusses the advantages of classifying the dividends as unqualified- investment income.

https://protaxconsulting.com/blog/maximizing-foreign-tax-credit/

" In summary, when a taxpayer has foreign-source qualified dividend income with foreign tax paid on the income, the tax adviser may need to test the tax return computations under the above two scenarios, i.e., qualified dividend income scenario versus investment income scenario, to determine which results in the lower overall tax burden."

( Not seeing my replies here.  Not sure why)

[SandyG19]

I cannot see my own replies.

[SandyG19]

Mike Same question for you -- where did you see the qualified dividend classification as being mandatory?

I cannot see any of my replies here

[SandyG19]

Not sure what is going on, but I'm not seeing my replies.  

A strategy to decrease the overall taxes while dealing with the foreign tax credit is to reclassify qualified foreign dividends to unqualified.  So, it seems that this classification as qualified is not mandatory.