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29 Cards in this Set
- Front
- Back
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Gift Taxes
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Donor, not recipient, is responsible for tax liability. Tax rate increases with the size of the gift |
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Churning
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Excessive Trading in a customers account to generate commissions ..abusive |
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Wash Sale
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Criteria: ISSUER, COUPON, MATURITY..2/3 must be different |
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Qualified Dividends
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higher investors tax bracket, higher the tax on qualified divs |
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Original Issue Discount (OID) Muni Bond
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bought at issue @ discount... yield% + |
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Financial vs non financial investment considerations
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Financial - involves concrete sums of money and cash flow |
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Inflation risk Capital Risk Timing Risk Interest Rate Risk Reinvestment Risk |
IR - decline in purchasing power CR - losing invested money TR - Poorly timed investment producing losses IRR - Rates go up, Prices go down RR - Rates go down, bonds are called and mortgages are paid off sooner...forced to reinvest at lower int rate |
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Call Risk Market Risk Credit Risk Liquidity Risk Political Risk |
CR - rates drop, bonds called, cant reinvest at comparable rate of return MR - Systemic Risk - Cant be diversified away CR - Default Risk - issuer will default LR - Marketability risk - cant sell quickly/fairly priced PR - PR |
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Capital Gain/Loss derived from what facet of a Bond
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Appreciation/Depreciation of the Price... INVERSELY RELATED TO THE YIELD Yield to maturity goes down, then the PRice goes up |
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Dividends With held abroad due to foreign taxes means
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Investor receives a tax credit, directly decreasing the investors American tax liability |
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Tax Liability of Corporations on Dividends received from another Corporation
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.3 of the dividend taxed @ corporate tax bracket
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When are Cash Dividends able to be taxed?
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Once they are paid, AKA the Payable Date |
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Registered representatives must notify their employer IN WRITING and be permitted to engage in
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PERMISSION NOT REQUIRED for owning publicly held shares Written permission not required |
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CAV ( Compound Accreted Value)
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Cost Basis After Accretion Accretion + Issue Price (Discount/Maturity) x Years accreted + IssuePrice =adjusted cost basis aka CAV |
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When is unused Capital loss carried forward? Max cap loss? |
when there is not enough Income for the net loss to cover...maximum of 3000 net cap loss |
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When Can an Investor apply Capital Losses to his tax liability?
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Unrealized loss(not sold out of the position) can not be used for tax purposes |
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Duration is? and is greatest for which bonds?
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Greatest for bonds with lower coupons and longer maturities |
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Muni bonds Bought at a premium must be
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Amortized Issue Price - (Premium/YearstoMaturity) x nheld 110 - (10/10)x2years = 108= cost basis If sold for 110...cap gains of 2 |
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For a registered representative to share in the profit/loss of a customers account
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FINRA must be notified in writing |
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Shorting against the Box
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Strategy designed to defer capital gains to a later tax period |
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What types of Bonds are most sensitive to interest rate fluctuations
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Zero Coupon bonds, b/c no Interest PMTs but majority of value is tied to price, more affected by int rate |
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Outside Business Activity Does not require notification for |
Not Req: Passive Investment ie LP unit, realestate |
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Reverse Churning
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Placing a investor who trades infrequently into a fee based account, for purpose of making significantly more money off onvestor than if his account was commission based |
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Three Methods of Reporting Sales to IRS
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First In First Out Average Cost Basis |
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Low tax bracket investors benefit the LEAST from what type of bonds
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Municipal Bonds whose tax benefit is diminished |
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AMT
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Excess AMT over the regular tax + regular tax = tax liability -costs associated with DPPs, tax exempt interest on private purpose, non essential munis, incentive stock options exceeding their fair market value |
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INTEREST ON U..S Treasury Bonds is only taxed at the FEDERAL LEVEL
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Cost basis for inherited stock
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The fair market value of the stock on date of death |
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Unlimited Marital Deduction
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...no estate taxes... taxes taken when survivor dies |
