TDS

Are there any tax implications for investors holding the different share series?

Created August 08, 2025 at 12:03 PM

Short answer:

The press release you referenced does not provide any specific tax guidance for the different share series (Common Shares, Series A Common Shares, Series UU Preferred Shares, and Series VV Preferred Shares). However, investors should be aware that, under U.S. tax law, the tax treatment of dividend income can vary depending on the type of security and the investor’s individual circumstances. Below is a comprehensive overview of the typical tax considerations that apply to each of the share series mentioned, along with practical steps you should take.

1. General U.S. Tax Rules for Dividend Income

Factor	Typical Treatment
Qualified vs. Non‑qualified dividends	Qualified dividends are taxed at the long‑term capital‑gains rates (0 %, 15 % or 20 % for most taxpayers). Non‑qualified (ordinary) dividends are taxed at ordinary income rates (10 %–37 %).
Holding period for qualification	The shares must be held more than 60 days during the 121‑day period that begins 60 days before the ex‑dividend date.
Form 1099‑DIV	Brokers report dividend amounts on Form 1099‑DIV, breaking out qualified and non‑qualified portions.
Net Investment Income Tax (NIIT)	An additional 3.8 % may apply to dividend income for high‑income taxpayers (modified AGI > $200,000 for single filers, $250,000 for married filing jointly).
State tax	Most states tax dividend income as ordinary income, though rates vary.
Foreign investors	Non‑resident aliens are generally subject to a 30 % withholding tax (reduced by tax treaties) on U.S. dividends, unless the shares are held in a tax‑advantaged entity (e.g., ADRs).

2. How Those Rules Typically Apply to Each TDS Share Series

Share Series	Typical Dividend Type	Likely Tax Characteristic	Why the distinction matters
Common Shares	Usually qualified dividends (if the holding period is satisfied).	Taxed at long‑term capital‑gains rates (0 %, 15 % or 20 %).	Most common‑stock dividends meet the IRS “qualified” criteria, assuming the 60‑day holding‑period test is met.
Series A Common Shares	Also a common‑stock class; generally qualified dividends if the holding period is met.	Same tax treatment as regular common shares.	The “Series A” label only designates a different voting/rights structure; it does not automatically change dividend tax status.
Series UU Preferred Shares	Preferred‑stock dividends are often non‑qualified (treated as ordinary income), but can be qualified if the preferred shares meet the “qualified dividend” requirements (including a holding period and that the underlying corporation is a U.S. C‑corp).	May be taxed at ordinary income rates (10 %–37 %) unless the shares qualify for the qualified‑dividend rules.	Preferred dividends are sometimes classified as “ordinary” because they may be considered a return of capital or because the shares do not meet the “qualified dividend” criteria.
Series VV Preferred Shares	Same considerations as Series UU – likely non‑qualified unless specific criteria are met.	Typically taxed as ordinary income.	The tax treatment is identical to other preferred series unless the prospectus explicitly states the dividends are qualified.

Key point: Whether a dividend from a preferred share is “qualified” depends on the type of preferred security (e.g., whether it is a “regular” preferred share of a U.S. corporation) and the holding period. Most preferred dividends are reported by brokers as non‑qualified, but you should confirm on your Form 1099‑DIV.

3. Specific Situations That Can Alter the Tax Outcome

Holding Period Not Satisfied
- If you sell the shares before the 60‑day holding‑period requirement, the dividend will be treated as non‑qualified, even for common shares.
Dividend Re‑characterization (Return of Capital)
- Occasionally, a company may designate part of a dividend as a return of capital. That portion reduces your cost basis rather than being taxed immediately. Only the amount that exceeds your adjusted basis is taxed (as a capital gain).
Qualified Dividend Eligibility for Preferred Shares
- The IRS allows certain preferred dividends to be qualified if:
  a) The preferred shares are not “convertible” into common stock at the time of the dividend, or the conversion feature is not exercised;
  b) The corporation paying the dividend is a U.S. C‑corporation; and
  c) The 60‑day holding‑period rule is met.
- Review the TDS prospectus or the dividend announcement for any language indicating “qualified” status.
Tax‑Advantaged Accounts (IRA, 401(k), etc.)
- If the shares are held inside a tax‑deferred or tax‑free account, dividends are generally not taxed in the year received. The tax consequences are deferred (IRA/401(k)) or eliminated (Roth IRA/Health Savings Account) until withdrawal.
Foreign Tax Withholding for Non‑U.S. Residents
- Non‑resident investors receive a 30 % withholding (or lower per treaty) on U.S. dividends. The withholding is generally final; no U.S. tax return is required unless you claim a treaty benefit.

4. Practical Steps for Investors

Action	Why It’s Important
Check your Form 1099‑DIV after the dividend payment.**	The broker will list the total dividend, qualified portion, and non‑qualified portion. This tells you exactly how the IRS will tax the payment.
Verify the holding period for each share class.**	Ensure you meet the 60‑day rule to qualify for lower rates.
Review the TDS dividend announcement or prospectus for any notes on “qualified dividends.”**	Some companies explicitly state that a preferred dividend is qualified; others do not.
Consider tax‑efficient portfolio placement (e.g., hold high‑yield preferred shares in tax‑advantaged accounts).**	This can reduce or eliminate ordinary‑income tax on the dividends.
Consult a tax professional if you have complex situations (e.g., high income subject to NIIT, state‐specific rules, foreign residency).**	Personalized advice can prevent costly mistakes.

5. Bottom Line

The press release itself does not specify tax treatment for each series; therefore, you must rely on standard U.S. dividend tax rules and the information that will appear on your brokerage‑issued Form 1099‑DIV.
Common Shares and Series A Common Shares are most likely to generate qualified dividends (subject to the 60‑day holding period).
Series UU and Series VV Preferred Shares are more likely to be treated as non‑qualified (ordinary‑income) dividends, unless the prospectus specifically states otherwise.
Holding periods, account type, and your overall tax situation (including NIIT and state taxes) will ultimately determine the exact tax liability.

Next step: After the dividend is paid, review the 1099‑DIV you receive, compare the amounts listed as “Qualified” vs. “Ordinary,” and, if needed, speak with a tax adviser to confirm the correct reporting on your tax return.