Investment and Finance

Favorable lower capital gains tax rates are available if a portion of your Taxable Income consists of "Net Capital Gains".
Net capital gains are your net LONG term capital gains in excess of net short term capital losses.
Your short term stock gain would not qualify as a lomg term Net capital gain.
The portion of the short term gains will be taxed as ordinary income at the tax bracket your taxable income falls in to.

A share of Common stock is an ownership interest in a corporation. Investors can profit from common stock in that they may receive stock dividends issued by the corporation and they may benefit from an increase in the value of their shares. There are no guarantees that either of these benefits will occur.

A Bond is a security that represents a loan from the purchaser of the bond to the issuing organization. The Organization may be a private company or a federal, state or local government. Bondholders receive a specific amount of interest on a regular basis and the return of their loan principal at the end of a stated period. A Bond provides a fixed amount of income. Its value will increase if interest rates fall and decrease if interest rates rise.

Cash equivalent investments are often called reserves. These represent short term loans ti high quality borrowers such as the U>S> Government. Examples of cash equivalent securities are Treasury bills and money market mutual funds. Cash equivalent investments offer stability of principal and high liquidity. Cash equivalent securities can be turned into cash easily and quickly. Due to the fact that risk is relatively low, the return on these investments is also relatively low.

In the most basic sense, risk can be defined as the chance of financial loss. The term risk is used interchangeable with uncertainty to refer to the variability of returns associated with a given asset. The more certain the return from an asset, the less variability and therefore the less the risk. Market risk is the chance you may lose money in a market decline.

Diversification is the spreading out of your investments among a number of different securities. Diversifying reduces risk because the value of yoyr holdings is not dependent on the performance of any single investment. A easy and quick way to diversify your investments is investing in a mutual fund.

A mutual fund pools the money of many individuals into a single fund. This fund is then used to buy a wide range of stocks, bonds, or other securities aimed at meeting a specific investment goal. When purchasing a share in a mutual fund, you are gaining a proportional share ownership of all the different investments in the fund. An investment in a mutual fund is a way to diversify your investments in a quick and easy manner. Mutual funds are investment companies regulated by the Investment Company Act of 1940.

Note that in 2013 the federal estate tax exemption has been made transferable between spouses. This is referred to as "portability of the estate tax exemption" and means that if one spouse dies in 2013 and his or her entire $5,250,000 estate tax exemption is not needed to avoid estate taxes on his or her estate, then the unused portion of the deceased spouse's estate tax exemption can be added to the surviving spouse's estate tax exemption.
This, in essence, means that a married couple will be able to pass on up to $10,500,000 to their heirs free from federal estate taxes without the need to use AB Trust planning.
But keep in mind that if the married couple have different sets of final beneficiaries, such as in the case of a second or later marriage where each spouse has their own children that they want inherit their separate assets after both spouses are deceased, then the couple will want to make use of AB Trust planning in order to insure that their separate beneficiaries will be their ultimate beneficiaries.
An A-B Trust is a regular trust made during the lifetimes of a taxpayer and spouse. One of its characteristics is that upon the death of either a husband or wife, it splits into two separate trusts, an "A" trust and a "B" trust. By doing this, the trust takes advantage of the decedent's current year's exemption ($5,250,000) and the unlimited marital deduction. The surviving spouse becomes the trustee of both trusts and has access to the funds in both trusts. The purpose of the A-B trust is to eliminate all estate taxes upon the death of the first spouse. You will be able to use an A-B trust if you are married and have an estate tax. That means an estate in the year 2013 worth more than $5,250,000 Million. If you do have an estate worth more than $5,250,000 Million in 2013 an A-B trust can help you. Speak to your local CPA or attorney about this tax planning strategy.

A QTIP Trust is a Qualified Terminal Interest Property Trust. A QTIP Trust permits the spouse with all of the assets to "leave" the property to the surviving spouse, but the surviving spouse cannot touch the principal of the trust. He or she must hold on to the QTIP Trust's income (interest, dividends, royalties, etc.) for his or her lifetime. But, the spouse with all the assets gets an Unlimited Marital Deduction that makes his estate pay Zero Estate Tax upon his death and it can utilize the surviving spouse's exclusion when she dies. Speak to your local CPA or attorney about this tax planning strategy.