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Does the interest from a Momey Market Fund (MMF) pass through ?
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Not A Clue
Jun 6, 2023, 10:41:57 PM6/6/23
to
Treasury MMF's distributions are non-qualified dividends on 1099. Treasury interest is exempt from State income tax.
I think distributions from Treasury MMF are also exempt from State Taxes. But can someone confirm?
TIA
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I think distributions from Treasury MMF are also exempt from State Taxes. But can someone confirm?
TIA
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2011) - All rights reserved. >>
<< ------------------------------------------------------- >>
ira smilovitz
Jun 7, 2023, 12:02:23 AM6/7/23
to
On Tuesday, June 6, 2023 at 10:41:57 PM UTC-4, Not A Clue wrote:
> Treasury MMF's distributions are non-qualified dividends on 1099. Treasury interest is exempt from State income tax.
>
> I think distributions from Treasury MMF are also exempt from State Taxes. But can someone confirm?
>
> TIA
>
> --
Generally, yes. There are a few states that have special requirements, such as a minimum percentage of treasury assets, which could cause an exception to the general rule. There are also a some that limit the percentage to that percentage that is generated by certain types of US government assets. (Sometimes, Treasury MMFs aren't 100% invested in US Treasuries.)
> Treasury MMF's distributions are non-qualified dividends on 1099. Treasury interest is exempt from State income tax.
>
> I think distributions from Treasury MMF are also exempt from State Taxes. But can someone confirm?
>
> TIA
>
> --
Ira Smilovitz, EA
Leonia, NJ
Not A Clue
Jun 7, 2023, 10:34:01 AM6/7/23
to
On Wednesday, June 7, 2023 at 12:02:23 AM UTC-4, ira smilovitz wrote:
> On Tuesday, June 6, 2023 at 10:41:57 PM UTC-4, Not A Clue wrote:
> > Treasury MMF's distributions are non-qualified dividends on 1099. Treasury interest is exempt from State income tax.
> >
> > I think distributions from Treasury MMF are also exempt from State Taxes. But can someone confirm?
> >
> > TIA
> >
> > --
> Generally, yes. There are a few states that have special requirements, such as a minimum percentage of treasury assets, which could cause an exception to the general rule. There are also a some that limit the percentage to that percentage that is generated by certain types of US government assets. (Sometimes, Treasury MMFs aren't 100% invested in US Treasuries.)
>
> Ira Smilovitz, EA
> Leonia, NJ
Thanks, Ira. I forgot to ask: Can you point me to some documentation that states these distributions retains it original income character?
> On Tuesday, June 6, 2023 at 10:41:57 PM UTC-4, Not A Clue wrote:
> > Treasury MMF's distributions are non-qualified dividends on 1099. Treasury interest is exempt from State income tax.
> >
> > I think distributions from Treasury MMF are also exempt from State Taxes. But can someone confirm?
> >
> > TIA
> >
> > --
> Generally, yes. There are a few states that have special requirements, such as a minimum percentage of treasury assets, which could cause an exception to the general rule. There are also a some that limit the percentage to that percentage that is generated by certain types of US government assets. (Sometimes, Treasury MMFs aren't 100% invested in US Treasuries.)
>
> Ira Smilovitz, EA
> Leonia, NJ
ira smilovitz
Jun 7, 2023, 11:14:01 AM6/7/23
to
On Wednesday, June 7, 2023 at 10:34:01 AM UTC-4, Not A Clue wrote:
> On Wednesday, June 7, 2023 at 12:02:23 AM UTC-4, ira smilovitz wrote:
> > On Tuesday, June 6, 2023 at 10:41:57 PM UTC-4, Not A Clue wrote:
> > > Treasury MMF's distributions are non-qualified dividends on 1099. Treasury interest is exempt from State income tax.
> > >
> > > I think distributions from Treasury MMF are also exempt from State Taxes. But can someone confirm?
> > >
> > > TIA
> > >
> > > --
> > Generally, yes. There are a few states that have special requirements, such as a minimum percentage of treasury assets, which could cause an exception to the general rule. There are also a some that limit the percentage to that percentage that is generated by certain types of US government assets. (Sometimes, Treasury MMFs aren't 100% invested in US Treasuries.)
> >
> > Ira Smilovitz, EA
> > Leonia, NJ
> Thanks, Ira. I forgot to ask: Can you point me to some documentation that states these distributions retains it original income character?
> --
You would have to look at each state's tax laws. You should find some guidance in the tax return instructions, but you might have to look further for a specific publication from the state tax department. For instance, this is NJ's publication: https://nj.gov/treasury/taxation/pdf/pubs/tgi-ee/git5.pdf
> On Wednesday, June 7, 2023 at 12:02:23 AM UTC-4, ira smilovitz wrote:
> > On Tuesday, June 6, 2023 at 10:41:57 PM UTC-4, Not A Clue wrote:
> > > Treasury MMF's distributions are non-qualified dividends on 1099. Treasury interest is exempt from State income tax.
> > >
> > > I think distributions from Treasury MMF are also exempt from State Taxes. But can someone confirm?
> > >
> > > TIA
> > >
> > > --
> > Generally, yes. There are a few states that have special requirements, such as a minimum percentage of treasury assets, which could cause an exception to the general rule. There are also a some that limit the percentage to that percentage that is generated by certain types of US government assets. (Sometimes, Treasury MMFs aren't 100% invested in US Treasuries.)
> >
> > Ira Smilovitz, EA
> > Leonia, NJ
> Thanks, Ira. I forgot to ask: Can you point me to some documentation that states these distributions retains it original income character?
> --
Ira Smilovitz, EA
Leonia, NJ
Tom Russ
Jun 7, 2023, 1:54:12 PM6/7/23
to
On Wednesday, June 7, 2023 at 8:14:01 AM UTC-7, ira smilovitz wrote:
> On Wednesday, June 7, 2023 at 10:34:01 AM UTC-4, Not A Clue wrote:
> > On Wednesday, June 7, 2023 at 12:02:23 AM UTC-4, ira smilovitz wrote:
> > > On Tuesday, June 6, 2023 at 10:41:57 PM UTC-4, Not A Clue wrote:
> > > > Treasury MMF's distributions are non-qualified dividends on 1099. Treasury interest is exempt from State income tax.
> > > >
> > > > I think distributions from Treasury MMF are also exempt from State Taxes. But can someone confirm?
> > > >
> > > > TIA
> > > >
> > > > --
> > > Generally, yes. There are a few states that have special requirements, such as a minimum percentage of treasury assets, which could cause an exception to the general rule. There are also a some that limit the percentage to that percentage that is generated by certain types of US government assets. (Sometimes, Treasury MMFs aren't 100% invested in US Treasuries.)
> > >
> > > Ira Smilovitz, EA
> > > Leonia, NJ
> > Thanks, Ira. I forgot to ask: Can you point me to some documentation that states these distributions retains it original income character?
> > --
> You would have to look at each state's tax laws. You should find some guidance in the tax return instructions, but you might have to look further for a specific publication from the state tax department. For instance, this is NJ's publication: https://nj.gov/treasury/taxation/pdf/pubs/tgi-ee/git5.pdf
> Ira Smilovitz, EA
For California, the Franchise Tax Board has this document:
> On Wednesday, June 7, 2023 at 10:34:01 AM UTC-4, Not A Clue wrote:
> > On Wednesday, June 7, 2023 at 12:02:23 AM UTC-4, ira smilovitz wrote:
> > > On Tuesday, June 6, 2023 at 10:41:57 PM UTC-4, Not A Clue wrote:
> > > > Treasury MMF's distributions are non-qualified dividends on 1099. Treasury interest is exempt from State income tax.
> > > >
> > > > I think distributions from Treasury MMF are also exempt from State Taxes. But can someone confirm?
> > > >
> > > > TIA
> > > >
> > > > --
> > > Generally, yes. There are a few states that have special requirements, such as a minimum percentage of treasury assets, which could cause an exception to the general rule. There are also a some that limit the percentage to that percentage that is generated by certain types of US government assets. (Sometimes, Treasury MMFs aren't 100% invested in US Treasuries.)
> > >
> > > Ira Smilovitz, EA
> > > Leonia, NJ
> > Thanks, Ira. I forgot to ask: Can you point me to some documentation that states these distributions retains it original income character?
> > --
> You would have to look at each state's tax laws. You should find some guidance in the tax return instructions, but you might have to look further for a specific publication from the state tax department. For instance, this is NJ's publication: https://nj.gov/treasury/taxation/pdf/pubs/tgi-ee/git5.pdf
> Ira Smilovitz, EA
https://www.ftb.ca.gov/forms/2017/17_1001.pdf
with the "Taxable Interest Income" entry on page 5.
Not A Clue
Jun 12, 2023, 11:42:18 AM6/12/23
to
On Wednesday, June 7, 2023 at 1:54:12 PM UTC-4, Tom Russ wrote:
> On Wednesday, June 7, 2023 at 8:14:01 AM UTC-7, ira smilovitz wrote:
> > On Wednesday, June 7, 2023 at 10:34:01 AM UTC-4, Not A Clue wrote:
> > > On Wednesday, June 7, 2023 at 12:02:23 AM UTC-4, ira smilovitz wrote:
> > > > On Tuesday, June 6, 2023 at 10:41:57 PM UTC-4, Not A Clue wrote:
> > > > > Treasury MMF's distributions are non-qualified dividends on 1099. Treasury interest is exempt from State income tax.
> > > > >
> > > > > I think distributions from Treasury MMF are also exempt from State Taxes. But can someone confirm?
> > > > >
> > > > > TIA
> > > > >
> > > > > --
> > > > Generally, yes. There are a few states that have special requirements, such as a minimum percentage of treasury assets, which could cause an exception to the general rule. There are also a some that limit the percentage to that percentage that is generated by certain types of US government assets. (Sometimes, Treasury MMFs aren't 100% invested in US Treasuries.)
> > > >
> > > > Ira Smilovitz, EA
> > > > Leonia, NJ
> > > Thanks, Ira. I forgot to ask: Can you point me to some documentation that states these distributions retains it original income character?
> > > --
> > You would have to look at each state's tax laws. You should find some guidance in the tax return instructions, but you might have to look further for a specific publication from the state tax department. For instance, this is NJ's publication: https://nj.gov/treasury/taxation/pdf/pubs/tgi-ee/git5.pdf
> > Ira Smilovitz, EA
> For California, the Franchise Tax Board has this document:
> https://www.ftb.ca.gov/forms/2017/17_1001.pdf
> with the "Taxable Interest Income" entry on page 5.
How about for non-residents (NRA) -- in terms of tax withholdings? Dividends from US sources have a withholdings rate of up to 30%, depending on the tax treaties. Corporate and Treasury interests are generally exempt from tax withholdings.
> On Wednesday, June 7, 2023 at 8:14:01 AM UTC-7, ira smilovitz wrote:
> > On Wednesday, June 7, 2023 at 10:34:01 AM UTC-4, Not A Clue wrote:
> > > On Wednesday, June 7, 2023 at 12:02:23 AM UTC-4, ira smilovitz wrote:
> > > > On Tuesday, June 6, 2023 at 10:41:57 PM UTC-4, Not A Clue wrote:
> > > > > Treasury MMF's distributions are non-qualified dividends on 1099. Treasury interest is exempt from State income tax.
> > > > >
> > > > > I think distributions from Treasury MMF are also exempt from State Taxes. But can someone confirm?
> > > > >
> > > > > TIA
> > > > >
> > > > > --
> > > > Generally, yes. There are a few states that have special requirements, such as a minimum percentage of treasury assets, which could cause an exception to the general rule. There are also a some that limit the percentage to that percentage that is generated by certain types of US government assets. (Sometimes, Treasury MMFs aren't 100% invested in US Treasuries.)
> > > >
> > > > Ira Smilovitz, EA
> > > > Leonia, NJ
> > > Thanks, Ira. I forgot to ask: Can you point me to some documentation that states these distributions retains it original income character?
> > > --
> > You would have to look at each state's tax laws. You should find some guidance in the tax return instructions, but you might have to look further for a specific publication from the state tax department. For instance, this is NJ's publication: https://nj.gov/treasury/taxation/pdf/pubs/tgi-ee/git5.pdf
> > Ira Smilovitz, EA
> For California, the Franchise Tax Board has this document:
> https://www.ftb.ca.gov/forms/2017/17_1001.pdf
> with the "Taxable Interest Income" entry on page 5.
So if a NRA has a position in a Treasury MMF, would there be a withholding because it is technically a dividend distribution? Or does the income character get passed through to the NRA MMF owner?
If the income character get passed through, can you point me to some documentation on that point?
TIA
Alan
Jun 12, 2023, 2:08:00 PM6/12/23
to
On Monday, June 12, 2023 at 8:42:18 AM UTC-7, Not A Clue wrote:
> On Wednesday, June 7, 2023 at 1:54:12 PM UTC-4, Tom Russ wrote:
>
> > On Wednesday, June 7, 2023 at 8:14:01 AM UTC-7, ira smilovitz wrote:
>
> > > On Wednesday, June 7, 2023 at 10:34:01 AM UTC-4, Not A Clue wrote:
>
> > > > On Wednesday, June 7, 2023 at 12:02:23 AM UTC-4, ira smilovitz wrote:
>
> > > > > On Tuesday, June 6, 2023 at 10:41:57 PM UTC-4, Not A Clue wrote:
> How about for non-residents (NRA) -- in terms of tax withholdings? Dividends from US sources have a withholdings rate of up to 30%, depending on the tax treaties. Corporate and Treasury interests are generally exempt from tax withholdings.
>
> So if a NRA has a position in a Treasury MMF, would there be a withholding because it is technically a dividend distribution? Or does the income character get passed through to the NRA MMF owner?
>
> If the income character get passed through, can you point me to some documentation on that point?
>
> TIA
> --
It keeps it's character as a dividend and is subject to tax withholding. See IRC Section 871(h) and 871(i).
> On Wednesday, June 7, 2023 at 1:54:12 PM UTC-4, Tom Russ wrote:
>
> > On Wednesday, June 7, 2023 at 8:14:01 AM UTC-7, ira smilovitz wrote:
>
> > > On Wednesday, June 7, 2023 at 10:34:01 AM UTC-4, Not A Clue wrote:
>
> > > > On Wednesday, June 7, 2023 at 12:02:23 AM UTC-4, ira smilovitz wrote:
>
> > > > > On Tuesday, June 6, 2023 at 10:41:57 PM UTC-4, Not A Clue wrote:
> How about for non-residents (NRA) -- in terms of tax withholdings? Dividends from US sources have a withholdings rate of up to 30%, depending on the tax treaties. Corporate and Treasury interests are generally exempt from tax withholdings.
>
> So if a NRA has a position in a Treasury MMF, would there be a withholding because it is technically a dividend distribution? Or does the income character get passed through to the NRA MMF owner?
>
> If the income character get passed through, can you point me to some documentation on that point?
>
> TIA
> --
Not A Clue
Jun 14, 2023, 1:18:55 AM6/14/23
to
On Monday, June 12, 2023 at 2:08:00 PM UTC-4, Alan wrote:
> On Monday, June 12, 2023 at 8:42:18 AM UTC-7, Not A Clue wrote:
> > On Wednesday, June 7, 2023 at 1:54:12 PM UTC-4, Tom Russ wrote:
> >
> > > On Wednesday, June 7, 2023 at 8:14:01 AM UTC-7, ira smilovitz wrote:
> >
> > > > On Wednesday, June 7, 2023 at 10:34:01 AM UTC-4, Not A Clue wrote:
> >
> > > > > On Wednesday, June 7, 2023 at 12:02:23 AM UTC-4, ira smilovitz wrote:
> >
> > > > > > On Tuesday, June 6, 2023 at 10:41:57 PM UTC-4, Not A Clue wrote:
> > How about for non-residents (NRA) -- in terms of tax withholdings? Dividends from US sources have a withholdings rate of up to 30%, depending on the tax treaties. Corporate and Treasury interests are generally exempt from tax withholdings.
> >
> > So if a NRA has a position in a Treasury MMF, would there be a withholding because it is technically a dividend distribution? Or does the income character get passed through to the NRA MMF owner?
> >
> > If the income character get passed through, can you point me to some documentation on that point?
> >
> > TIA
> > --
> It keeps it's character as a dividend and is subject to tax withholding. See IRC Section 871(h) and 871(i).
> --
Thanks, Alan.
> On Monday, June 12, 2023 at 8:42:18 AM UTC-7, Not A Clue wrote:
> > On Wednesday, June 7, 2023 at 1:54:12 PM UTC-4, Tom Russ wrote:
> >
> > > On Wednesday, June 7, 2023 at 8:14:01 AM UTC-7, ira smilovitz wrote:
> >
> > > > On Wednesday, June 7, 2023 at 10:34:01 AM UTC-4, Not A Clue wrote:
> >
> > > > > On Wednesday, June 7, 2023 at 12:02:23 AM UTC-4, ira smilovitz wrote:
> >
> > > > > > On Tuesday, June 6, 2023 at 10:41:57 PM UTC-4, Not A Clue wrote:
> > How about for non-residents (NRA) -- in terms of tax withholdings? Dividends from US sources have a withholdings rate of up to 30%, depending on the tax treaties. Corporate and Treasury interests are generally exempt from tax withholdings.
> >
> > So if a NRA has a position in a Treasury MMF, would there be a withholding because it is technically a dividend distribution? Or does the income character get passed through to the NRA MMF owner?
> >
> > If the income character get passed through, can you point me to some documentation on that point?
> >
> > TIA
> > --
> It keeps it's character as a dividend and is subject to tax withholding. See IRC Section 871(h) and 871(i).
> --
I'll limit my comments below to interest and dividends only.
Sec 871 is specifically on taxes on NRAs. In general, all interest and dividends are subject to US income tax. Section 871(h) exempt "portfolio interest", from US sources, from taxes. US T-Bills seems to be excluded from the definition of Portfolio interest" because the maturity is less than 1 yr -- i.e. even if owned by NRA directly (e.g. through a US brokerage firm)??
Section 871(i) exempts Bank interest (not effectively connected with the conduct of a US trade or business) and dividends paid by foreign corp. So dividends from a Treasury MMF (in the US) remains taxable to an NRA owner.
I noticed 871(k) exempts interest-related dividends received from a regulated investment company ("RIC") -- EXCEPT when the beneficial owner is a NRA. I don't understand the purpose of this exemption if it doesn't apply to NRAs -- since Code 871 pertains to taxation on NRA (and not US taxpayers).
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