Jamok,

My intent with dividend re-investment is to allow me to add NOK shares at what I consider low prices.  Any gains on the reinvested money over the next few years will be tax deffered, it also allows me to further dollar cost average on the shares at these low prices (as I stated above) however, uncle Sam will extract its pound of flesh if it is on a NON-Retirement acount.  If that reinestment takes place in a Tax deffered account such as IRA, ROTH IRA, Roll-Over-IRA, then the cdividend as well as the gains are NOT taxed until distributuions start.  Sorry if I was not clear about my post.

I should also add that I believe that regardless of account type, the Finish government will tax the dividend (b@stards).  I too "think" that the US governement will allow some tax credit on the NON-retirement account for the tax paid to a foreign goverment. If anyone knows otherwise please correct me.

lt cap,

Thanks for the exposition - makes perfect sense.  I've been buying NOK as well as all other networkers from a 'regular' account. So used to them having no dividend, it never occurred to me to put it in a SEP or Roth IRA - always thought that those accounts should have high-yielding stocks - INTC, VZ, F - all the 'usual suspects'. But owning a very sizeable amount of NOK, putting the dividend in a non- or deferred taxable account is almost a no brainer (slaps forhead) - the sheer size of the dividend, around 2%, give or take, is substantial. I get it - it's taxed no matter what you do with the dividend in a 'regular' acccount - you're buying shares at what you consider an attractive price is a separate issue and action.

I'm rather pissed that NOK gave no thought to its NA customers when it turned the stock-swap into a taxable 'forced sale' action. Totally unnecessary it seems to me, given that it hits holders with a sudden unanticipated tax action. And their dividend is probaby subject to the usual European 25-30% tax, and then Uncle Sam has a go at you.

lt cap,

Every ADR (foreign based stock) I've owned nicks me for their country's taxes, and send what's left of the dividend to me. I'm not sure what Canada charges  (SLW, ABX, etc.), but my experience with Euro stocks, as I said earlier, has been in the range of 25-30%. The IRS *does* allow that such taxes be deducted from your taxes, that is, before the IRS taxes that dividend. I'm not sure that the foreign tax write-off is offset against your stock capital gains, but it would make sense for that to be the case.

It looks me to me like taxes on a foreign dividend are unavoidable, even in a retirement account, except there seems to be an exception for Canadian companies.

I looked on the IRS site and it seems like it's hard to find, so I just Google'd and found articles like this, and on the surface it appears to make sense. US retirement accounts are not recognized by foreign sources so they want their taxes from the dividend, and the US Govt can't be expected to offset your taxes paid with a credit today considering that from the US' point of view, they don't see the other side of that offset until you start distributing from the account possibly decades from now, which was made lower by paying of those taxes a long time ago. This is for an IRA. A Roth may be a little different.

Since you don't pay current taxes on investment income in your IRA or 401(k), there's no deduction or credit currently available for foreign taxes paid on investments held in these accounts.

Think of it as a timing issue: The amount you pay in foreign taxes today reduces your retirement assets, and therefore reduces the amount of tax the IRS is able to collect when you start making withdrawals.

schwab.com/pu...uction

Countries without dividend withholding tax

One of the best ways to avoid dividend withholding tax is to invest in countries without such a tax. Among the countries that don't withhold foreign investors' dividends are Hong Kong, India, Singapore, and the United Kingdom.

There is always a risk that these tax policies could change as these countries look for additional revenue but for now they allow U.S. residents to easily avoid dividend withholding taxes.

Retirement account exemptions

While holding foreign dividend stocks in an IRA is often a bad idea since a foreign tax credit cannot be claimed (see below for more on this), there are some situations where IRAs do have an advantage.

In the case of Canadian dividend withholding tax, U.S. investors can avoid the tax by holding shares in an IRA or 401(k). This makes Canadian dividends stocks one of the best tax-positioned investments for investors looking to put international investments in their retirement account. U.S. investors may be particularly interested in large Canadian banks for both this tax position and their higher dividend yields compared to similar U.S. banks.

fool.com/ho...x.aspx

Re INFN:  There is a lot of congestion around these levels, the stock has bounced up around 15% from the lowest point, so I believe it could be digesting the gains.  That said, while the chart has looked awful all year long up until one month ago, it is mending and I believe it should overtake this level as more good news arrive.  I too think the beating was waaaaay over done, as you know I am in the camp that thinks that fair value right now is $18-$19, long term (3 years) much higher (back into mid to high 20s), but that is on management executing well and consistently.

I have had PG in a DRIP program for years, and I always get taxed every year on the dividends that buy (partial) shares. it might just be how I set it up.

Jon,

Thanks for the info. I feel pretty well convinced by this point that, outside of IRAs or equivalent retirement accounts, there is no way to avoid the tax hit of dividends, and DRIPs serve some purposes well, but delaying the tax hit until later isn't one of them. The only case in which I saw the IRS wasn't in 'heads they win, tails you lose' mode, was years ago when Jester pointed out that if the underlying stock in an options trade was held long term, and finished in the money so that shares were sold, then the premium collected from the option was considered long term, regardless of the 'time period' in which the options were held. There was kind of a 'stunned silence' for a minute on the board - (figuratively), before people started asking 'really?