Investment and Finance

Joint tenancy is a form of co-ownership. Joint tenancy is when property is owned equally by two or more persons who have rights of survivorship. This means that when one joint tenant dies, the property passes automatically to the surviving tenants.

"Tenancy in common" is a form of co-ownership. "Tenants in common" do not have rights of survivorship. At death, an owner's share passes to his or her estate and requires probate. "Tenancy in common" may own unequal shares in proportion to their contributions.

Tenancy by the entirety is a form of co-ownership. Tenancy by the entirety exists only between spouses and is generally used for real property. It includes the right of survivorship and neither spouse can dispose of the asset without the other's permission. Tenancy by the entirety is not recognized in all states.

There are 9 community property states. They are AZ, CA, ID, LA, NV, NM, TX, WA, and WI. Each spouse is considered to own one half of the property acquired after marriage in a community property state.
There is no right of survivorship in community property state. When one spouse dies, the other spouse does not automatically inherit the deceased spouse's share.

On traditional IRAs, the gains realized over the years in the form of capital gains, dividends, interest are deferred and not taxable until you take IRA distributions. When you do take the IRA distribution, the amount is considered ordinary income and taxed as such and not taxed as capital gains.

If you owned shares of stock that were converted to another company's shares of stock at a later date, and you then subsequently sell the new company's stock, then the holding period starts the day after you bought the original shares of stock in the initial company.

A Day Trader can classify his or her activity as a business reported on IRS Schedule C. This business is not limited to a annual capital loss limitation of $3,000. There is no limitation to the losses that may be incurred by Day Trader's business. Expenses for such things as computer equipment, supplies, margin interest, or software that might have been limited to 2% AGI limitations on IRS Schedule A can now be taken in full on IRS Schedule C. Also, a Day Trader may use the market-to-market accounting method for his or her portfolio. This will allow recognition of gains or losses before the gain is realized on the sale of the security.

A Day Trader is required to report his or her business activity on IRS Schedule C. Any income from the business is subject to both income and self-employment taxes. There is also a strict accounting/bookkeeping requirement. The Day Trader must segregate investments into 2 separate groups, trading securities and investment securities. Gains and losses from investment securities are reportable on IRS Schedule D. Gains and losses from trading securities are reportable on IRS Schedule C.

The Section 475(f) market to market election must be made by the due date of the previous year's tax return. The trader's short-term capital gains or losses are converted into ordinary income or loss. Losses that otherwise would have been limited to $3,000 are fully deductible against ordinary income in the current year. This election should be discussed with your local CPA.