What are the Tax Implications for Making a Profit (or Loss) On a Stock?
Gains on stock investments will be taxable in the current year unless they can be offset with losses. Stocks that appreciate in value do not incur any tax liability while they are held, unless they pay dividends. Dividends will generally be taxable as ordinary income. For this article we will focus on capital appreciation instead of dividends. Capital appreciation can be considered long-term gains or short-term gains by the IRS upon the sale of the shares. A stock held for less than a year will incur short-term capital gains taxes, which are taxed at ordinary income rates. Continue reading...
What can I learn about venture capital?
Many people know about venture capitalists that help provide the funding for startup companies in Silicon Valley and other areas. In reality, only a small portion of venture capital is directed at seed money for startups. The rest of it is directed at companies in various phases of growth that need capital to fuel a new expansion or to turn their business around. Venture capital comes from individual investors or venture capital firms who agree to infuse new money into a business in exchange for an equity stake in the business going forward. Continue reading...
What is a Life Annuity?
Annuities are primarily designed to pay a substantially similar sum at regular intervals until the annuitant dies. Life insurance companies write these contracts since they are designed as a kind of longevity insurance. A lifetime income annuity, sometimes called a life annuity, is a stream of guaranteed payments for the duration of the annuitant’s life, based on the sum used to purchase the lifetime income and the age of the annuitant at the time of purchase. Life annuities can also be joint-life, meaning the contract will pay an amount to either of two people as long as one is alive. Continue reading...
What is a Lifetime Payout Annuity?
Lifetime income annuities provide a guaranteed payout over the life of the annuitant. “Payout” is not a term used officially, but it denotes that the principal amount invested in the annuity is designed to be paid out and depleted over the life expectancy of the annuitant. The payout rate is competitive with other sources of retirement income. Life insurance companies created annuity products as a way to guarantee a client never runs completely out of money. Statistically, according to some surveys, elderly people are more afraid of outliving their money than of nearly anything else. Today medicine can keep people alive longer and longer but not functioning at full capacity, and certainly not able to generate more income in most cases. Continue reading...
What is IRS Publication 524, Credit for the Elderly and the Disabled?
IRS Link to Publication — Found Here Individuals over 65 years old or are disabled may be eligible for a tax credit. Publication 524 describes this credit in detail. The credit is only available to those whose adjusted gross income (AGI) is relatively low, and the income limits are described in Pub. 524. Individuals over the age of 65 or younger than 65 but permanently disabled may be eligible to receive a federal income tax credit. Continue reading...
What is Bad Debt?
Lending companies or other companies with Receivables may characterize certain unpaid accounts as Bad Debt and write off the losses. Bad debt is debt that is on the books and is in default, meaning payment has not been made on it in a long while. Creditors, banks, and companies may periodically get bad debt off of their accounting books by moving it out of Receivables. Most companies have attempted to calculate their exposure to default risk and bad debt, and have allocated amounts into accounts such as Allowance for Doubtful Accounts (ADA). It can be passed off to debt collection agencies, but most of the debt will never be recouped. Continue reading...
What is a CUSIP?
CUSIP is basically like a Dewey Decimal number for stocks and U.S./local government bonds. CUSIP stands for Committee on Uniform Securities Identification Procedures. CUSIPs are alphanumeric identifiers of certain types of securities, but most commonly used for stocks and bonds. The first six characters identify the issuer and use letters; the seventh and eighth characters (which can be alphabetical or numerical) identify the type of issue; and the last digit is used as a check digit. Continue reading...
What is a Margin Call?
A margin call is a mandatory request by the custodian/broker for the account holder to add equity to the account, either by depositing cash or selling securities to raise cash. When an investor takes an account on margin, the custodian will require that they keep a certain amount of equity/cash in the account to maintenance the borrowed amount. If the account value drops past a certain level, the custodian may require the investor to add equity to the account to cover the margin balance. Continue reading...
What is Counter-Party Risk?
Counter-party risk is the risk that the person on the other side of the trade will not meet his or her contractual obligations. In other words, it’s essentially the risk of doing business with someone. In financial contracts, counter-party risk is also known as “default risk.” Continue reading...
What Does Market Capitalization Mean?
Market Capitalization refers to the total ‘market-size’ of a company, calculated by the number of shares outstanding multiplied by the stock price. Investors should take care not to consider a company’s market capitalization as an accurate reflection of the company’s actual size by assets. Companies with very large market capitalizations can still operate with net losses, Twitter being an example. Continue reading...