Company: GDV-PK
Filing Date: 2025-08-08
Form Type: N-14
Source: 0001829126-25-006008
Chunk: 102

Company: GABELLI DIVIDEND & INCOME TRUST
Filing Date: 2025-08-08
Form: N-14
Chunk 102
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 will be long term or short term, depending upon the holding period of the security. Preferred Trust does not have control over the exercise of the call options it writes and thus does not control the timing of such taxable events.

With respect to a put or call option that is purchased by Preferred Trust, if the option is sold, any resulting gain or loss will be a capital gain or loss, and will be short term or long term, depending upon the holding period for the option. If the option expires, the resulting loss is a capital loss and is short term or long term, depending upon the holding period for the option. If the option is exercised, the cost of the option, in the case of a call option, is added to the basis of the purchased security and, in the case of a put option, reduces the amount realized on the underlying security in determining gain or loss.

Preferred Trust’s investment in so-called “section 1256 contracts,” such as regulated futures contracts, most foreign currency forward contracts traded in the interbank market, options on most stock indices and any non-equity options, are subject to special tax rules. All section 1256 contracts held by Preferred Trust at the end of its taxable year are required to be marked to their market value, and any unrealized gain or loss on those positions will be included in Preferred Trust’s income as if each position had been sold for its fair market value at the end of the taxable year, thereby potentially causing Preferred Trust to recognize gain in advance of a corresponding receipt of cash. The resulting gain or loss will be combined with any gain or loss realized by Preferred Trust from positions in section 1256 contracts closed during the taxable year. Provided such positions were held as capital assets and were not part of a “hedging transaction” nor part of a “straddle,” 60% of the resulting net gain or loss will be treated as long term capital gain or loss, and 40% of such net gain or loss will be treated as short term capital gain or loss, regardless of the period of time the positions were actually held by Preferred Trust.

Investments by Preferred Trust in certain “passive foreign investment companies” (“PFICs”) could subject Preferred Trust to U.S. federal income tax (including interest charges) on certain distributions or dispositions with respect to those investments which cannot be eliminated by making distributions to shareholders. Elections may be available to Preferred Trust to mitigate the effect of the PFIC rules, but such elections generally accelerate the recognition of income without the receipt of