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
Category: Investing
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,
Capital Gains Tax Rates
While reading misc.invest.*, you may have seen people talking about “long-term gains” or “short-term losses.” Despite what it sounds like, they are not talking about investment strategies, but rather a potentially important part of the United States tax code. All this matters because the IRS taxes short-term and long-term gains differently. The “holding period” is
How to Compute Capital Gains
How to Compute Cap Gains Gains made on equities (i.e., stocks or mutual funds) are subject to capital gains taxes. In the simplest case, you bought a lot of shares (either stocks or mutual funds) at some date, made no further investments (took your dividends in cash), and finally sold the shares at some later
Capital Gains Cost Basis
This article discusses how to determine the cost basis of a security according to the rules of the US tax code. The most common need for the cost basis of a security like stock is to report the proper gain or loss when that security is sold. This article sketches the issues for the simple
Backup Withholdings
Once the IRS declares you a “Bad Boy” (for having underpaid or been negligent on your tax filings in other ways) they stick you with “Backup Withholding.” What this means, essentially, is that any firm that deals with your money in taxable tranactions is required to withhold (and submit to IRS) 31% of the proceeds
Value vs Growth Investing Strategy
Investors will frequently read about growth stocks and growth strategies, as well as value stocks and value strategies. These terms describe reasons why people believe certain stocks will increase in value. This article gives a brief summary of the investment strategies centered upon finding those stocks. The value strategy attempts to find shares of companies
Stock Investment Strategies
List of Stock Investment Strategies This article offers a brief survey of several strategies that investors use to guide their stock purchases and sales. Before we start the survey, here’s a golden rule of investing: Know why you are buying a particular stock — don’t wait until its price goes up or down to think