How does the Jobs and Growth Tax Relief Reconciliation Act of 2003 affect the reporting of ordinary income and capital gains?
A. Qualified dividends will be taxed at a maximum rate of 15% and for 2008 through 2010, taxpayers in the 10% or 15% tax brackets will be subject to a rate of 0%. Qualified dividends are dividends received from domestic corporations and certain foreign corporations. A mutual fund may flow through to its shareholders the qualified dividends it receives from its investment in equity securities. Dividends paid by the fund from interest income received and short-term capital gains will not qualify for the lower tax rates. Box 1a of Form 1099-DIV will report the amount of total ordinary dividends received, Box 1b will report the portion of total ordinary dividends that are qualified dividends.
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