qualified preferred dividend
(3) Qualified preferred dividends (A) In general In the case of 1 or more qualified preferred dividends with respect to any share of stock— (i) this section shall not apply to such dividends if the taxpayer holds such stock for more than 5 years, and (ii) if the taxpayer disposes of such stock before it has been held for more than 5 years, the aggregate reduction under subsection (a)(1) with respect to such dividends shall not be greater than the excess (if any) of— (I) the qualified preferred dividends paid with respect to such stock during the period the taxpayer held such stock, over (II) the qualified preferred dividends which would have been paid during such period on the basis of the stated rate of return. (B) Rate of return For purposes of this paragraph— (i) Actual rate of return The actual rate of return shall be the rate of return for the period for which the taxpayer held the stock, determined— (I) by only taking into account dividends during such period, and (II) by using the lesser of the adjusted basis of the taxpayer in such stock or the liquidation preference of such stock. (ii) Stated rate of return The stated rate of return shall be the annual rate of the qualified preferred dividend payable with respect to any share of stock (expressed as a percentage of the amount described in clause (i)(II)). (C) Definitions and special rules For purposes of this paragraph— (i) Qualified preferred dividend The term “qualified preferred dividend” means any fixed dividend payable with respect to any share of stock which— (I) provides for fixed preferred dividends payable not less frequently than annually, and (II) is not in arrears as to dividends at the time the taxpayer acquires the stock. Such term shall not include any dividend payable with respect to any share of stock if the actual rate of return on such stock exceeds 15 percent. (ii) Holding period In determining the holding period for purposes of subparagraph (A)(ii), subsection (d)(3) shall be applied by substituting “5 years” for “2 years”.