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This article applies to:

  • Product: ONESOURCE Trust Tax

Calculate qualified dividend income

ONESOURCE Trust Tax identifies qualified dividends as transactions, including those from mutual funds, which meet two key criteria:
  • The system assigns or factors them to a qualified dividend tax code.
  • They fulfill a specific holding period requirement.
Qualified dividend tax codes include:
Tax Code
Description
3
Foreign Dividends
5
Domestic Dividends
6
Partnership & Fiduciary Dividends
201
Non-distributive Dividends
202
Non-distributive Foreign Dividends

Set qualified dividend income calculation options

The following options apply to the qualified dividend income calculation (referred to as the QDI calculation). To set the options, select
SETUP
 then
Options&Overrides
.
  • The
    Bypass automated Qualified Dividend Income calculation
     Compute and Enhanced 1099 options determine whether the QDI calculation is used. Select
    No
     to use the QDI calculation.
  • The
    Evaluation of mutual fund or factored transactions in the Qualified Dividend Income calculation
     Compute-Federal and Enhanced 1099 options determine how the QDI calculation evaluates mutual fund transactions and transactions factored to tax code 3, 5, 6, 201 or 202. Set these options to
    Perform all of the QDI calculations
     or
    Bypass only the NQ asset flag check, still perform other QDI calculations
    .
  • The
    Dividend transaction without Ex-date (Does not apply to Tax Deferred Accounts)
     SmartBridge probe can alert you if an account has at least 1 dividend transaction without an ex-dividend date. To receive an alert, set this option to display a message and stop processing.
  • The
    Computed during 60 day (90 day if applicable) period after ex-dividend date (Does not apply to Tax Deferred Accounts)
     SmartBridge probe can alert you to the possibility that a sales transaction could occur that would cause the dividend to become a nonqualified dividend. To receive an alert, set this option to display a message and stop processing.
  • The
    No units specified on a dividend where the asset was sold within 60 day (90 day if applicable) period after ex-dividend date (Does not apply to Tax Deferred Accounts)
     SmartBridge probe can alert you to dividend transactions that have no units and where the asset was sold during the 60 or 90 day holding period. Set this option to display a message and stop processing.

The QDI calculation process

The QDI calculation follows a process to evaluate and classify a transaction as qualified or nonqualified dividend income. The process includes the following steps:
Step 1
1. Are the Bypass automated Qualified Dividend Income calculation options set to Yes?
If the options are set to
Yes
, the transaction remains in its current tax code.
If the options are set to
No
, ONESOURCE Trust Tax continues to step 2.
Step 2
2. Is the asset for the transaction not qualified?
If the asset is not qualified, the transaction doesn’t qualify for further evaluation.
If the asset is qualified, ONESOURCE Trust Tax continues to step 3.
Step 3
3. Does an ex-dividend date exist for the transaction?
If there is no ex-dividend date, the transaction is assumed to be qualified dividend income. A message displays or processing stops, depending on how the
Dividend transaction without ex-date (Does not apply to Tax Deferred Accounts)
 SmartBridge probe is set.
If there is an ex-dividend date, ONESOURCE Trust Tax continues to step 4.
Step 4
4. How is the holding period defined?
  • For common stock, the shares must be held for more than 60 days during a 120-day period. ONESOURCE Trust Tax calculates the holding period as starting 60 days prior to the ex-dividend date and ending 60 days after the ex-dividend date.
  • For preferred stock, the shares must be held for more than 90 days during a 180-day period. ONESOURCE Trust Tax calculates the holding period as starting 90 days prior to the ex-dividend date and ending 90 days after the ex-dividend date.
If the holding period requirement is not met, a message displays or processing stops, depending on how the
Computed during 60 day (90 day if applicable) period after ex-dividend date (Does not apply to Tax Deferred Accounts)
 SmartBridge probe is set.
If the holding period requirement is met, ONESOURCE Trust Tax continues to step 5.
Step 5
5. Is there a sale of the asset within the holding period?
If no sale exists between the ex-dividend date and 60 or 90 days after the ex-dividend date, the transaction is considered qualified dividend income.
If a sale exists between the ex-dividend date and 60 or 90 days after the ex-dividend date, ONESOURCE Trust Tax continues to step 6.
Step 6
6. Is the sale inherited property?
If the sale is inherited property, the transaction is considered qualified dividend income.
If the sale is not inherited property, ONESOURCE Trust Tax continues to step 7.
Step 7
7. Does the sale meet the holding period requirement?
If the difference between the trade date and the acquisition date is greater than 60 or 90 days, the transaction is considered qualified dividend income.
If the difference between the trade date and the acquisition date is less than 60 or 90 days, ONESOURCE Trust Tax continues to step 8.
Step 8
8. Do units exist for the transaction?
If no units exist, the transaction doesn’t qualify for further evaluation. A message displays or processing stops, depending on how the
No units specified on a dividend where the asset was sold within 60 day (90 day if applicable) period after ex-dividend date (Does not apply to Tax Deferred Accounts)
 SmartBridge probe is set.
If units exist, ONESOURCE Trust Tax continues to step 9.
Step 9
9. Were all units sold?
If all units were sold, the transaction doesn’t qualify for the pro rata calculation.
If no units were sold, ONESOURCE Trust Tax performs the pro rata calculations detailed in step 10 to determine the portions of the dividend transaction that are considered qualified and nonqualified dividend income.
Step 10
10. ONESOURCE Trust Tax performs the pro rata calculation
The following formula is used to calculate the taxable amount of qualified dividends:
Dividend Amount - Nonqualified Dividend = Qualified Dividend
The following formula is used to calculate the taxable amount of nonqualified dividends:
(Sales Units/Transaction Units) x Dividend Amount = Nonqualified Dividend