Can someone explain to me why the new tax law is structured so that payments in lieu of ordinary dividends do not get the same favorable tax treatment? For the life of me, it makes no sense whatsoever. If you have street name shares in a margin account at a brokerage, they can and do hypothecate your shares to short sellers. Now the brokerages have to keep track of whose shares were lent out and divide up the 1099-DIV in sections indicating whether or not you received ordinary dividends or payment in lieu from the party who has borrowed your shares. What madness. I guess the only way to ensure you get ordinary dividends is to instruct your broker to park those shares in a cash account. The only positive I see is that this accounting/tax quirk may drive the market higher if the shorts are pressured to buy back in simply because the lenders want ordinary dividends vs payment in lieu. Simply ridiculous.