Investment and Finance

The difference between the discounted purchase price and the value at maturity is the return or yield on the bond and is called accretion. A bond's accretion must be calculated annually and this amount must be reported to the IRS as income on Form 1099. OID bonds are generally issued at a low or zero coupon and are issued at a deep discount relative to the bond's par value.

The IRS does not require that brokerage firms report options sales on form 1099-B. The IRS does require brokerage firms to report the assignment or exercise of options if cash is received as a result of the assignment or exercise.

The IRS does not require that brokerage firms report options sales on form 1099-B. The IRS does require brokerage firms to report the assignment or exercise of options if cash is received as a result of the assignment or exercise.

A short sale is a sale of stock that you do not own but borrow for purposes of the sale from a broker. Brokerage firms are required by the IRS to report all stock and bond security sales, including short sales. A short sale is considered a sale according to the IRS regulations and must be reported to you and then indicated on form 1099-B.

The capital gain and loss limitations do not apply to the securities of a “dealer”, except for securities held primarily for investment. Nor do they apply to real estate sales by a dealer in realty, except for property as an investment.
A “trader” as distinguished from a “dealer” in securities is subject to the capital gain and loss limitations.
A securities “dealer” is similar to a merchant in that he purchases securities with the expectation of reselling them for a profit.
The profit is based on hopes of finding a market of buyers to purchase the securities in excess of his cost. A “trader” buys and sells securities for his own account.
A trader’s expectations of making a profit depend on the rise in value to sell at a price in excess of cost. More details can be found in IRS Publications 544 and 550 http://www.irs.ustreas.gov/prod/forms_pubs/forms.html

Securities Dealers are required to follow the IRS “market to market” rules. Traders may elect to use the “market to market” rules.
If elected, all security gains and losses are treated as ordinary income or loss, and all securities on hand at the end of the year are deemed to be sold at the end of the year at Fair Market Value.
The unrealized gain or loss on a security increases or decreases the basis of the security.
The benefit of making this election is that “traders” can take ordinary loss deductions for short term trading losses that are not subject to the $3,000 per year limit.
Also the “wash sale’ rules do not apply. Taxpayers may make the "market to market" election by attaching a statement to a timely filed return for the taxable year immediately preceding the election year. It is also necessary to complete IRS Form 3115 - Application for change in accounting method.

Some advantages of a SEP Simplified Employee Pension Plan are: Contributions to a SEP are tax deductible and your business pays no taxes on the earnings on the investments. You are not locked into making contributions every year. In fact, you decide each year whether, and how much, to contribute to your employees’ SEP-IRAs. Generally, you do not have to file any documents with the government. Sole proprietors, partnerships, and corporations, including S corporations, can set up SEPs. You may be eligible for a tax credit of up to $500 per year for each of the first 3 years for the cost of starting the plan. Administrative costs are low.

SIMPLE IRA plans must be set up by 10/1/xx for that year's contributions to be deductible on that year's tax return.

Put A "Put" is an option granting the right to "Sell" the underlying futures contract. This is opposite of a call. A "Call" is an option that gives the holder the right to "Buy" the underlying futures contract.