The Uniform Gifts to Minors Act (UGMA), superseded by the Uniform Transfers to Minors Act (UTMA) in some states, is simply a way for a minor to own property, such as securities. The UGMA/UTMA setup is commonly used to give monies to a minor. IRS regulations allows a person to give many thousands of dollars
Tax Swaps
A tax swap is an investment strategy usually designed for municipal bond portfolios. It is designed to allow you to take a tax loss in your portfolio while at the same time adjusting factors such as credit quality, maturity, etc. to better meet your current needs and the outlook of the market. A tax swap
How are Short Sales Taxed
How are Short Sales Treated for Tax Purposes? What do you do if a short sale is open at the end of a calendar year? Brokerage houses report all sales (normal or short) on Form 1099-B as “sales”, so you might think that you have to report it on your Schedule D to make the
How to Report Option Trades for Taxes
This article summarizes the rules for reporting gains and losses from trading stock options. Like any other security transaction, even if you get cash up front as in the case of shorting a stock or writing an option, you do not declare a profit or loss until the transaction has been closed out. Also note
How to Report Fund Distributions for Taxes
This article briefly lists the rules for reporting the most common distributions from mutual funds for federal tax purposes. A mutual fund is required by law to pass on essentially all of its profits annually to its owners, the shareholders, in order to avoid being taxed on that income. These payments include both capital gains
US Taxes for Foreign Investors
Non-resident aliens can hold investments in the United States quite easily, and most aliens are exempt from many taxes on income from those investments. For example, if a non-U.S. national works in the U.S. for some period of time and amasses a nice portfolio of stocks while here, that person can hang on to the
Stock Gifts
This article introduces some issues that crop up when making gifts of stock. Gift taxes are an orthogonal but closely related issue; see the article elsewhere in the FAQ for more details. Also see the FAQ article on determining the cost basis of securities for notes on computing the basis of shares that were received
Estate and Gift Tax
This article offers an overview of the estate and gift taxes imposed in the United States. Estate taxes may be imposed on the money (“estate”) a person leaves to heirs. Gift tax concerns the amount of money a person can “gift” (used as a verb in this context) to another person without tax consequences, as
Deductions for Investors
This article offers a brief overview of the deductions that investors can claim when filing US tax returns. The most significant one is losses. An investor may deduct up to US$3,000 in net capital losses each year using the Form 1040 Schedule D. Additional losses in a calendar year can be carried forward to the
Cashless Option Exercise
This article discusses the tax treatment of an employee’s income that derives from stock options, specifically the case in which an employee exercises non-qualified stock options without putting any money down. First, a digression. What is a non-qualified option? A non-qualified stock option is the most popular form of stock option given to employees. Basically,