- A type of dividend to which capital gains tax rates are applied. These tax rates are usually lower than regular income tax rates.
Ordinary dividends that do not qualify for this tax preference are taxed at an individual's normal income tax rate.
In order to qualify:
1. The dividend must have been paid by an American company or a qualifying foreign company.
2. The dividends are not listed with the IRS as dividends that do not qualify.
3. The required dividend holding period has been met.
Investment dictionary. Academic. 2012.
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