Aren't CFD inefficent for income stocks
Quote:
Originally Posted by
loofa
Dividends received.......................................... ....................$4,700
I thought CFD's were inefficient for income shares because of the way dividends are treated. You only get the net dividend (not the IC's) but end up paying tax on it - essentially double taxation.
ie.
Directly held:
Dividend of $67 with 33IC's. Taxable income of $100 but IC's of 33 so no tax to pay for a 33% taxpayer
CFD's
Dividend of $67 but no IC's. Taxable income of $67 so additional tax to pay of 22 for a 33% taxpayer.
Of the top of my head, excluding capital gains, that means you lose 2% compared with holding directly??
Therefore a margin account (borrowing but own the underlying share) rather than a derivative is better. Or has it changed since I looked at it.