Nominee Dividend

AAA

DEFINITION of 'Nominee Dividend'

A dividend that a person receives on behalf of someone else. If you receive a nominee dividend, you are responsible for paying income tax on it unless you pass the dividend on to its rightful owner. If you pass the dividend on, you must notify the IRS of the transfer in order to remove your obligation to pay taxes on it. The recipient of a nominee dividend should use IRS form 1099-DIV to notify both the IRS and the dividend recipient that the dividend income has been transferred. Filing this form allows the nominee to adjust his or her taxable income downward by the amount of the transferred dividend payment. The recipient then pays the tax on the dividend he or she received.

INVESTOPEDIA EXPLAINS 'Nominee Dividend'

Such a situation might arise if a sister and brother opened a brokerage account together and purchased a dividend-paying stock in that account. Because the sister is listed first on the account, the brokerage firm reports to the IRS that she received the entire dividend. Since she actually shared the dividend with her brother, she must file form 1099-DIV so that the IRS will only hold her responsible for the portion of dividends she actually kept. Her brother will receive a copy of the 1099-DIV indicating which portion of the dividend he received and is responsible for paying tax on.

RELATED TERMS
  1. Dividend

    A distribution of a portion of a company's earnings, decided ...
  2. Dividend Yield

    A financial ratio that shows how much a company pays out in dividends ...
  3. Nominee Interest

    An interest payment that a person receives on behalf of someone ...
  4. Interest

    1. The charge for the privilege of borrowing money, typically ...
  5. Dividend Imputation

    An arrangement in Australia and several other countries that ...
  6. Record Date

    The cut-off date established by a company in order to determine ...
RELATED FAQS
  1. How do dividend distributions affect additional paid in capital?

    Whether a dividend distribution has any effect on additional paid-in capital depends solely on what type of dividend is issued: ... Read Full Answer >>
  2. When does the holding period on a stock dividend start?

    The holding period on a stock dividend typically begins the day after it is purchased. Understanding the holding period is ... Read Full Answer >>
  3. What is the average annual dividend yield of companies in the retail sector?

    According to data published by the NYU Leonard N. Stern School of Business, as of January 2015, the average annual dividend ... Read Full Answer >>
  4. What kind of companies in the utilities sector offer the most stable dividends for ...

    Among the companies that offer the most stable dividends for risk-averse investors are large, solidly established U.S.-based ... Read Full Answer >>
  5. What average annual total return does the utilities sector generate?

    Due to their highly stable earnings and cash flows, utilities companies are popular among investors interested in dividend ... Read Full Answer >>
  6. Why is the utilities sector popular among value investors?

    The utilities sector is popular among value investors due to the dividends paid by utility companies as well as the traditionally ... Read Full Answer >>
Related Articles
  1. Investing Basics

    Dissecting Declarations, Ex-Dividends And Record Dates

    Understanding the dates of the dividend payout process can be tricky. We clear up the confusion.
  2. Investing Basics

    How And Why Do Companies Pay Dividends?

    If a company decides to pay dividends, it will choose one of three approaches: residual, stability or hybrid policies. Which a company chooses can determine how profitable its dividend payments ...
  3. Options & Futures

    Dividends, Interest Rates And Their Effect On Stock Options

    Learn how analyzing these variables are crucial to knowing when to exercise early.
  4. Fundamental Analysis

    Why Dividends Matter

    Seven words that are music to investors' ears? "The dividend check is in the mail."
  5. Investing Basics

    How Dividends Work For Investors

    Find out how a company can put its profits directly into your hands.
  6. Investing Basics

    Got Dividends? Here's How to Reinvest Them

    Reinvesting dividends is almost always a good idea if you intend to hold your shares for the long term, and there are several ways to do it.
  7. Professionals

    Are Stock Buybacks Always Good for Shareholders?

    Stock buyback programs aren't always done with the interests of shareholders in mind. It's important to try to understand the motivation behind such moves.
  8. Investing

    Short-Term Funds or Fixed Deposits: Is One Better?

    Choosing between short-term funds and fixed deposits? Here's what you need to know.
  9. Trading Strategies

    Dividend Versus Buyback: Which Is Better?

    Companies reward their shareholders in two main ways--by paying dividends or buying back shares. An increasing number of blue-chips are now doing both.
  10. Trading Strategies

    Microsoft's Game of Catch-Up With The Dow

    Microsoft (MSFT) underperformed the Dow Jones Industrial Average during the 2002 to 2007 bull market, but it has played catch-up in recent years.

You May Also Like

Hot Definitions
  1. Dog And Pony Show

    A colloquial term that generally refers to a presentation or seminar to market new products or services to potential buyers.
  2. Topless Meeting

    A meeting in which participants are not allowed to use laptops. A topless meeting organizer can also ban the use of smartphones, ...
  3. Hedging Transaction

    A type of transaction that limits investment risk with the use of derivatives, such as options and futures contracts. Hedging ...
  4. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  5. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  6. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!