Long Term Capital gain Calculation
Net Long term gain x .15 = Tax Liability
Short Term Capital Gain Calculation
Net Short term gain x investors tax bracket = Tax Liability
What is the max write off in a single year
3000
IRS Form 1099B
in addition to the gross sales procedures to customers and to the IRS on the annual IRS form, BD must also report cost basis and holding period information
How are customers transactions treated
FIFO
Unless the customer requests something else by the settlement date
How are cash dividends generally taxed
15%
Are US citizens trading foreign securities are still subject to US tax?
Yes, all three
How are stock dividends treated
Reduce a customers stock basis
Wash Sale Rule
If a customer sells a security at a loss and within 30 days before or after the sale purchase substantially the same securities, the loss is not allowed for federal income tax purpose
Rule applies to call options or convertible securities
Dividend income for a corp of another corps stock (tax purposes)
70% exclusion
Regressive Tax
This tax system allows high-income taxpayers to pay a small fraction of the low-income tax rate. f
Greater burden on whose who could least afford it such as sales and gasoline tax
Progressive Tax
occurs when the tax rate increases as the income increases, such as income, gift, and estate taxes
Holding period on equity options
begins on the business day after the date the call is exercised
What does earned income exclude?
Annuities or pensions
Cost basis for a bond
original price paid, does not include the bonds accrued interest
Cost basis for a stock
Includes acquisition cost plus all associated cost such as commissions and fees
Alternative Minimum Tax
Recoups some of the tax advantages. would have to be paid if the amount of AMT exceeds the investors regular tax liability
Gift Tax exclusion
14,000
28,000
What holding period will gifted securities hold
The same holding period as the gifter
Holding period for inherited stock
Automatically long term
Accelerated Cost Recovery System
form of depreciation based on an assets recovery period rather than its useful life
ACRS does not allow component Depreciation but requires composite depreciation
Shelter Income
Variable Annuities - deferred income
Municipal bonds - tax free interest income
IRAs - deferred income
Keogh plans - deferred income
Direct Participation Programs - conduit theory