Which type of dividends are eligible for lower capital gains rates?

The correct choice focuses on qualified dividends, which are indeed eligible for lower capital gains tax rates. Qualified dividends are those paid by domestic corporations or qualified foreign corporations on stocks that have been held for a requisite period. This essential holding period helps ensure that the dividend is a return on a long-term investment, distinguishing it from ordinary income which is typically taxed at higher rates.

Tax policy recognizes the importance of encouraging long-term investment strategies, and therefore, offers a preferential tax treatment on qualified dividends. This treatment has a significant impact on investors, as it can lead to substantial tax savings compared to ordinary dividends, which are taxed at the individual's regular income tax rates.

Other types of dividends, such as ordinary dividends, do not qualify for this treatment, as they are taxed as regular income. Non-dividend distributions from partnerships are also not classified as dividends and thus fall outside this context. Similarly, capital gains distributions from private equities do not meet the criteria for qualified dividends. This differential tax treatment helps investors maximize their after-tax returns on those qualified dividends.