Does anyone know the tax status of their ORI dividends. I see the consolidated statements showing a loss which would lead me to believe that they would be characterized as return of capital(Nondividend Distributions) on a 1099. On the other hand from the 10K parent only statements it shows a considerable amount of retained earnings which would lead me to believe that they are Qualified Dividends. Has anyone out there owned this stock in 2011 and could check to see if their dividends were classed as a Qualified Dividend or as a Nondividend distribution on their 2011 1099.
It is a qualified dividend that next year will mean you are taxed at your regular income tax rate, what ever that it. In 2011 my qualified dividends, because of the BUSH TAX CUTS, were only taxed at a max. of 15% which was quite a bit less than my income tax rate. You could have reduced it to 0% or 5% if you had a very low adjusted income tax rate. This all still applies for 2012 dividends because the BUSH TAX CUTS do not end until 12/31/2012. Others dividends you might have heard about that are tax fee now only apply to dividends on options type plays in some ETFs and other funds if it is truly a return of equity because it is something like a COVERED CALL PLAY. That dividend is tax free because it is considered a partial return of equity now but could costs you more later when you sell the fund because it reduces you BASIS which could increase you tax reported gains while you actual payout could be less when the fund is sold. I hope this answers your question.
You have discussed tax rules but not the specific taxability of the ORI dividend. When a company has distributed all of its "earnings and profits"(a tax accounting term that is similar to retained earnings) any further dividends are considered Nondividend Distributions (aka return of capital). I checked with Charles Schwab and the ORI dividend in 2011 was considered qualified. What I am trying to figure out is when will ORI run out of earnings and profits such that the dividend will be considered a return of capital. If and when that happens you don't report the dividend as current income and instead you reduce your cost basis and report a larger gain(hopefully) when the stock is sold.