Dividends

[Charl]

Just a question on dividends:
Assume I buy a stock (paying a $10 dividend) at $100 on the LDR. On the ex-div date, the stock is supposed to drop to $90. Now if I manage to sell the same stock on the ex-div date at $89, do I make a net loss $1 ? Or net profit of $9 ?

 

[Chad]

Charl,I would say your scenario creates a $1 dollar loss since your investment of $100 returned $99. For tax purposes though, I think you would have to view it as an $11 loss of capital and $10 of income, thus effecting your after-tax return since the two are likely taxed at different rates. What do you think?Regards,
Chad

 

[c]

EMAILNOTICES>noYou have a $1 capital loss and $10 in dividend income for tax purposes.