Stocks – Return on Capital

I recommend that stocks with dividends that are return of capital be held in taxable accounts because the dividends are already tax deferred.

Investors in foreign stocks that have dividends taxed by the governments where the companies are located can receive tax credits from the Internal Revenue Service so they are not taxed twice – but only if the stocks are held in a taxable account.

If these stocks are held in a tax-deferred account, the foreign tax authority will still take taxes out of the dividends, but investors will not be eligible for tax credits from the IRS. That money will be gone forever.

Dan