What is Form 706: Estate Tax and Generation-Skipping Transfer Tax?
IRS Link to Form — Found Here The Form 706 is required not only if there is a tax implication for an estate, but also to claim exclusions. Each person has an exclusion of 5.49 Million as of 2017. For married couples, that goes double, such that heirs to an estate under $11 million probably will not owe any estate taxes. A surviving spouse should still report the inherited portion of the deceased spouse’s estate up to the exclusion amount, otherwise the exclusion will be lost. There are also lines for the lifetime gift exclusion amount and the generation skipping transfer tax. Continue reading...
What is a Mortgage Rate Lock?
Mortgages take a while to process, but a broker or bank can lock in a rate for themselves or their clients. Locking-in rates costs money somewhere along the line, and the longer the rate is locked in, the more it costs. 60 days is generally the longest time frame you will see a rate locked in, due to the cost associated with that risk. Mortgage rates can be locked in for a period of time long enough to underwrite the loan. This might be for a period as short as 20 days or as long as 60 days. Continue reading...
What is the Inverted Cup-and-Handle (Bearish) Pattern?
The Inverted Cup-and-Handle (sometimes called Inverted Cup-and-Holder) pattern forms when prices rise then decline to create an upside-down “U”like shape (1, 2, 3, also known as the Cup), followed by a shorter relatively straight price increase that bounces from the right lip (from 3 to 4, creating the Handle). The rising handle forms as a result of mounting buying pressure created when the security retests a low at the right lip of the cup. Once the buyers give up, sellers take over and the security has the potential to decline rapidly. Continue reading...
What is a Prospectus?
A Prospectus is a legal document that must be filed with the Securities and Exchange Commission (SEC) when an investment is offered for sale to the public. The most commonly known forms of a prospectus are those that accompany a mutual fund, ETF, or an annuity when purchased by an investor. For an annuity and/or a mutual fund, a Prospectus contains details on the fund management. Continue reading...
What is Off-Balance-Sheet-Financing?
A company might use this maneuver in order to keep their debt to equity levels in check. The most frequently used types of off-balance-sheet-financing are joint ventures, research and development partnerships, and operating leases. Continue reading...
What is Fiscal Policy?
Fiscal Policy refers to the tactics used by a central government to influence the nation’s economy, whether by setting tax and/or spending policies. Fiscal policy is related to monetary policy, in that they are both aimed to either boost an economy or temper growth to avoid overheating. A fiscal policy conducive to growth would aim to have low taxes and higher level of spending. When a government invokes “austerity” measures, it means they are trying to cut spending most likely to reel-in budget deficits or overall debt levels. Continue reading...
What is the Gearing Ratio?
In mechanics, gears are used to increase torque and to translate the force to other areas. In finance, a gearing ratio is a term referring the amount leverage being used, compared to the amount of equity. A high gearing ratio is almost the same as a high debt-to-equity ratio. The gearing ratio is computed in a slightly different manner. Gearing is another word for leverage. High amounts of debt can spell trouble for a company down the road, and investors are wise to consider that. Continue reading...
What is Foreign Investment Funds (FIF) tax?
New Zealand and Australia, in particular, have instituted a tax regime for offshore investments that fall into the definition of Foreign Investment Funds (FIFs). FIFs will generally be mutual fund companies that are based overseas, but can also include cash value life insurance underwritten by a foreign company and some stock portfolios from overseas stock exchanges. The US has the PFIC tax, which is a passive foreign investment corporation tax. The PFIC category generally applies to mutual funds or pooled investment companies from foreign countries. Continue reading...
What is Tangible Net Worth?
Tangible Net Worth is another word for Book Value or Net Asset Value. Only the tangible assets and cash are included, and any liabilities are subtracted. Any depreciation that would otherwise be included for accounting purposes is added back in. Tangible net worth, or book value, is the remaining balance after intangible assets and all liabilities are deducted from net assets. This is the amount that will be divided among shareholders in the event of a company liquidation, and the minimum that the company would be purchased for by an acquiring company. Shareholders can use this as a bare-minimum estimation of the value of their shares. Continue reading...
What are index futures?
Index futures are futures contracts written on an index in which a large position can be held with a relatively small margin requirement. Index futures can be used for hedging or speculation. A "good faith" initial margin deposit (also called a performance bond) of a fraction of the contract size is all that is required to hold a substantial position, with a notional value worth significantly more than the amount invested. Continue reading...