Hello everyone ! Imagine simple situation, I'm long some ordinary US stock (let it be IBM) and short another ordinary US stock (let it be MO). During this particular year I have received $1000 in dividends from IBM and I also paid $1000 dividends as a short seller to an owner of MO shares . Can anyone explain whether these two numbers will be netted so I will not pay any taxes from dividends at all ? Or I should pay taxes for $1000 received from IBM even if I paid the same amount while shorting other stock ? I'm talking only about taxation of dividends now. And thanks everyone !
no. they are not netted. The IBM is a dividend. The MO is a payment in lieu where you send the div amount to the guy you borrowed the share from.
A dividend is a payment made from a company's earnings to its owners or customers. Because dividends represent a portion of net income, they are considered taxable as income from the company, and a more favorable dividend tax rate to individuals. Not all companies pay out dividends - some use net profits to reinvest in the company's growth and to fund projects where that money is accounted for as retained earnings. Dividends are often charged at a lower rate than payroll earnings, and they are qualified for a tax-free income exemption. Also when accounting for this, the tax take from dividend payments is smaller. A dividend exemption is available to all residents, regardless of their tax status.