Stock dividend gains vs capital loss

[joebob]

I have a specific example I have a question on. In theory, a stock should trade down by the amount of its dividend on it's ex-dividend date, ceteris paribus. Of course that doesn't always happen, but let's assume that's the case for this question.

Let's say I buy a stock the day before the ex-dividend date at let's say $50/share and sell it the next day on the ex-dividend date at $45/share, and the dividend is $5/share. For tax purposes, I now have a $5 dividend gain, and a $5 short term capital loss, right? I know in general, capital losses only offset against other income up to $3000, but it seems strange that just because a company issues you a dividend, you're immediately at a disadvantage.

 

[eljin]

I have a specific example I have a question on. In theory, a stock should trade down by the amount of its dividend on it's ex-dividend date, ceteris paribus. Of course that doesn't always happen, but let's assume that's the case for this question.

Let's say I buy a stock the day before the ex-dividend date at let's say $50/share and sell it the next day on the ex-dividend date at $45/share, and the dividend is $5/share. For tax purposes, I now have a $5 dividend gain, and a $5 short term capital loss, right? I know in general, capital losses only offset against other income up to $3000, but it seems strange that just because a company issues you a dividend, you're immediately at a disadvantage.

I have similar question and want to know how to offset dividend gain vs capital loss. From researches I done in the past and just as what you mentioned:

- capital loss can only offset by capital gains
- dividend income is tax according to your tax rate if they are non-qualified(hold more than 60 days before ex-date).
- I think Bush's tax cut on dividend got extended by Obama until end of 2012, but that's only for qualified dividend. 2013- will be the ordinary tax rate unless further extend. Check wiki and irs.gov and sec.gov for more detail.

Would love to see more responses on this topic and how to mitigate capital-loss. If you have more information, please do share.

Thanks