Investment and Finance

A Revocable Trust ia an agreement that gives income producing property to an heir and that may be altered numerous times, as often as the creator pleases. The entire trust can be canceled or revoked.

The expression Short Against the Box is a situation in which a taxpayer is both long and short owner in the same security, at the same time in his or her poertfolio account. It is a practice usually employed to defer tax liability on capital gains. Although the customer sells the stock short, he or she actually owns the security, which is held in the broker's "box." The aim is to protect a capital gain in owned shares, while deferring the taxes due if the shares were actually sold and the capital gain reported. This way, the investor can wait until he or she is in a more favorable tax situation to sell the securities.

A Stock Split is a division of outstanding shares of a corporation into a stated number of shares by which each outstanding share entitles its owner to a fixed number of new shares. In a reverse split, a stock owner receives less shares at a correspondingly higher price. In a forward split, a stock owner receives more shares at a correspondingly lower price. In both reverse and forward splits, the total equity number of shares multiplied by the stock price remains the same. An example of a two-for-one forward split, the owner of 200 shares, each worth $200, would be given 400 shares, each worth $100.

A Stop Order is an order to buy or sell a security as soon as the security's price hits a specific price level. Buy stop orders are placed above the market and sell stop orders are placed below it. The order becomes a market order if and when a transaction takes place at or through the stated stop price. A Buy Stop Order is an order that becomes a market order to buy if and when someone trades a round lot at or above the stop price. A Sell Stop Order is an order that becomes a market order to sell if and when someone trades a round lot at or below the stop price.

A Tender Offer is a formal proposition to stockholders to sell their shares in response to a large purchase bid. The buyer customarily agrees to assume all costs and reserves the right to accept all, or a specific number or none of the shares presented for acceptance.

A Underwriter is also known as an investment banker or distributor. He or she is a Middleman between an issuing corporation and the public. The underwriter usually forms an underwriting group, called a syndicate, to limit risk and commitment of capital. He or she may also contract with selling groups to help distribute the issue for a percentage. In the distribution of mutual funds, the underwriter is known as a sponsor or distributor, or even wholesaler. Investment bankers also offer other services, such as counsel and advice on the raising and investment of capital.

A Unit Investment Trust is a closed end investment company, which consists of a professionally selected basket of securities. It is either stocks or bonds. These securities are packaged into a single investment portfolio that usually remains fixed over the life of the trust. The total ownership of the portfolio is divided into a fixed number of units. Each unit represents a partial ownership of the underlying portfolio.

A loss is not deductible when incurred as a like kind exchange. A loss can only be deductible if you gave up unlike property as part of the exchange. The loss would be calculated as the amount equal to the excess of the adjusted basis of the unlike property over its fair market value at the date of the exchange. The loss would be reported on IRS Form 4797.

No. Business inventory or stock is considered property that does not fall with the IRS like kind tax free rules.
Generally, the other property that also does not fall into the like kind tax free rules are securities, notes, property held for personal purposes, foreign real estate, property held for sale and partnership interests.