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TOOLS & TECHNIQUES OF INVESTMENT PLANNING
2nd Edition
CHAPTER 1: CASH AND CASH EQUIVALENTS
WHAT IS IT?
WHEN IS THE USE OF THIS TOOL INDICATED?
ADVANTAGES
DISADVANTAGES
TAX IMPLICATIONS
ALTERNATIVES
WHERE AND HOW DO I GET IT?
Certificates of Deposit
Money Market Funds
WHAT FEES OR OTHER ACQUISITION COSTS ARE INVOLVED?
HOW DO I SELECT THE BEST OF ITS TYPE?
WHERE CAN I FIND OUT MORE ABOUT IT?
QUESTIONS AND ANSWERS
CHAPTER 2: U.S. GOVERNMENT SECURITIES
WHAT IS IT?
WHEN IS THE USE OF THIS TOOL INDICATED?
ADVANTAGES
DISADVANTAGES
TAX IMPLICATIONS
ALTERNATIVES
WHERE AND HOW DO I GET IT?
WHAT FEES OR OTHER ACQUISITION COSTS ARE INVOLVED?
HOW DO I SELECT THE BEST OF ITS TYPE?
WHERE CAN I FIND OUT MORE ABOUT IT?
QUESTIONS AND ANSWERS
CHAPTER 3: CORPORATE BONDS
WHAT IS IT?
WHEN IS THE USE OF THIS TOOL INDICATED?
ADVANTAGES
DISADVANTAGES
TAX IMPLICATIONS
ALTERNATIVES
WHERE AND HOW DO I GET IT?
WHAT FEES OR OTHER ACQUISITION COSTS ARE INVOLVED?
HOW DO I SELECT THE BEST OF ITS TYPE?
WHERE CAN I FIND OUT MORE ABOUT IT?
QUESTIONS AND ANSWERS
CHAPTER 4: CONVERTIBLE SECURITIES
WHAT IS IT?
WHEN IS THE USE OF THIS TOOL INDICATED?
ADVANTAGES
DISADVANTAGES
TAX IMPLICATIONS
ALTERNATIVES
WHERE AND HOW DO I GET IT?
WHAT FEES OR OTHER ACQUISITION COSTS ARE INVOLVED?
HOW DO I SELECT THE BEST OF ITS TYPE?
WHERE CAN I FIND OUT MORE ABOUT IT?
QUESTIONS AND ANSWERS
CHAPTER 5: MUNICIPAL BONDS
WHAT IS IT?
WHEN IS THE USE OF THIS TOOL INDICATED?
ADVANTAGES
DISADVANTAGES
TAX IMPLICATIONS
ALTERNATIVES
WHERE AND HOW DO I GET IT?
WHAT FEES OR OTHER ACQUISITION COSTS ARE INVOLVED?
HOW DO I SELECT THE BEST OF ITS TYPE?
WHERE CAN I FIND OUT MORE ABOUT IT?
QUESTIONS AND ANSWERS
CHAPTER 6: STRIPPED BONDS
WHAT IS IT?
WHEN IS THE USE OF THIS TOOL INDICATED?
ADVANTAGES AND DISADVANTAGES
TAX IMPLICATIONS
ALTERNATIVES
CHAPTER 7: ZERO-COUPON BONDS
WHAT IS IT?
WHEN IS THE USE OF THIS TOOL INDICATED?
ADVANTAGES AND DISADVANTAGES
TAX IMPLICATIONS
ALTERNATIVES
QUESTIONS AND ANSWERS
CHAPTER 8: PROMISSORY NOTES
WHAT IS IT?
WHEN IS THE USE OF THIS TOOL INDICATED?
ADVANTAGES
DISADVANTAGES
TAX IMPLICATIONS
ALTERNATIVES
WHERE AND HOW DO I GET IT?
WHAT FEES OR OTHER ACQUISITION COSTS ARE INVOLVED?
HOW DO I SELECT THE BEST OF ITS TYPE?
WHERE CAN I FIND OUT MORE ABOUT IT?
QUESTIONS AND ANSWERS
CHAPTER 9: GUARANTEED INVESTMENT CONTRACTS (GICs)
WHAT IS IT?
WHEN IS THE USE OF THIS TOOL INDICATED?
ADVANTAGES
DISADVANTAGES
TAX IMPLICATIONS
ALTERNATIVES
WHERE AND HOW DO I GET IT?
WHAT FEES OR OTHER ACQUISITION COSTS ARE INVOLVED?
HOW DO I SELECT THE BEST OF ITS TYPE?
WHERE CAN I FIND OUT MORE ABOUT IT?
QUESTIONS AND ANSWERS
CHAPTER 10: COMMON STOCKS
WHAT IS IT?
WHEN IS THE USE OF THIS TOOL INDICATED?
ADVANTAGES
DISADVANTAGES
TAX IMPLICATIONS
ALTERNATIVES
WHERE AND HOW DO I GET IT?
WHAT FEES OR OTHER ACQUISITION COSTS ARE INVOLVED?
HOW DO I SELECT THE BEST OF ITS TYPE?
WHERE CAN I FIND OUT MORE ABOUT IT?
QUESTIONS AND ANSWERS
CHAPTER 11: PREFERRED STOCK
WHAT IS IT?
WHEN IS THE USE OF THIS TOOL INDICATED?
ADVANTAGES
DISADVANTAGES
TAX IMPLICATIONS
ALTERNATIVES
WHERE AND HOW DO I GET IT?
WHAT FEES OR OTHER ACQUISITION COSTS ARE INVOLVED?
HOW DO I SELECT THE BEST OF ITS TYPE?
WHERE CAN I FIND OUT MORE ABOUT IT?
QUESTIONS AND ANSWERS
CHAPTER 12: WARRANTS AND RIGHTS
WHAT IS IT?
WHEN IS THE USE OF THIS TOOL INDICATED?
ADVANTAGES
DISADVANTAGES
TAX IMPLICATIONS
Stock Rights
Warrants
ALTERNATIVES
WHERE AND HOW DO I GET IT?
WHAT FEES OR OTHER ACQUISITION COSTS ARE INVOLVED?
HOW DO I SELECT THE BEST OF ITS TYPE?
WHERE CAN I FIND OUT MORE ABOUT IT?
QUESTIONS AND ANSWERS
CHAPTER 13: STOCK OPTIONS
WHAT ARE THEY?
WHEN IS THE USE OF THIS TOOL INDICATED?
ADVANTAGES
DISADVANTAGES
TAX IMPLICATIONS
ALTERNATIVES
WHERE AND HOW DO I GET IT?
WHAT FEES OR OTHER ACQUISITION COSTS ARE INVOLVED?
HOW DO I SELECT THE BEST OF ITS TYPE?
WHERE CAN I FIND OUT MORE ABOUT IT?
QUESTIONS AND ANSWERS
CHAPTER 14: FINANCIAL FUTURES
WHAT IS IT?
WHEN IS THE USE OF THIS TOOL INDICATED?
ADVANTAGES
DISADVANTAGES
TAX IMPLICATIONS
ALTERNATIVES
WHERE AND HOW DO I GET IT?
WHAT FEES OR OTHER ACQUISITION COSTS ARE INVOLVED?
HOW DO I SELECT THE BEST OF ITS TYPE?
WHERE CAN I FIND OUT MORE ABOUT IT?
QUESTIONS AND ANSWERS
CHAPTER 15: COMMODITY FUTURES
WHAT IS IT?
WHEN IS THE USE OF THIS TOOL INDICATED?
ADVANTAGES
DISADVANTAGES
TAX IMPLICATIONS
ALTERNATIVES
WHERE AND HOW DO I GET IT?
WHAT FEES OR OTHER ACQUISITION COSTS ARE INVOLVED?
HOW DO I SELECT THE BEST OF ITS TYPE?
WHERE CAN I FIND OUT MORE ABOUT IT?
QUESTIONS AND ANSWERS
CHAPTER 16: MUTUAL FUNDS
WHAT IS IT?
WHEN IS THE USE OF THIS TOOL INDICATED?
ADVANTAGES
DISADVANTAGES
TAX IMPLICATIONS
ALTERNATIVES
WHERE AND HOW DO I GET IT?
WHAT FEES OR OTHER ACQUISITION COSTS ARE INVOLVED?
HOW DO I SELECT THE BEST OF ITS TYPE?
WHERE CAN I FIND OUT MORE ABOUT IT?
QUESTIONS AND ANSWERS
CHAPTER 17: EXCHANGE-TRADED FUNDS (ETFs)
WHAT IS IT?
HOW DOES IT WORK?
WHEN IS THE USE OF THIS TOOL INDICATED?
ADVANTAGES
DISADVANTAGES
TAX IMPLICATIONS
ALTERNATIVES
WHERE AND HOW DO I GET IT?
WHAT FEES OR OTHER ACQUISITION COSTS ARE INVOLVED?
HOW DO I SELECT THE BEST OF ITS TYPE?
WHERE CAN I FIND OUT MORE ABOUT IT?
QUESTIONS AND ANSWERS
CHAPTER 18: LIFE INSURANCE
WHAT IS IT?
WHEN IS THE USE OF THIS TOOL INDICATED?
ADVANTAGES
DISADVANTAGES
TAX IMPLICATIONS
ALTERNATIVES
WHEN AND HOW DO I GET IT?
WHAT FEES OR OTHER ACQUISITION COSTS ARE INVOLVED?
HOW DO I SELECT THE BEST OF ITS TYPE?
Appropriate Types of Policies
Specific Policies
WHERE CAN I FIND OUT MORE ABOUT IT?
QUESTIONS AND ANSWERS
CHAPTER 19: ANNUITIES
WHAT IS IT?
WHEN IS THE USE OF THIS TOOL INDICATED?
ADVANTAGES
DISADVANTAGES
TAX IMPLICATIONS
ALTERNATIVES
WHERE AND HOW TO GET IT
WHAT FEES OR OTHER ACQUISITION COSTS ARE INVOLVED?
HOW DO I SELECT THE BEST OF ITS TYPE?
WHERE CAN I FIND OUT MORE ABOUT IT?
QUESTIONS AND ANSWERS
CHAPTER 20: REAL ESTATE
WHAT IS IT?
WHEN IS THE USE OF THIS TOOL INDICATED?
ADVANTAGES
DISADVANTAGES
TAX IMPLICATIONS
ALTERNATIVES
WHERE AND HOW DO I GET IT?
Outright Ownership
General Partnership
Limited Partnership
Corporation
S Corporation
REITs
WHAT FEES OR OTHER ACQUISITION COSTS ARE INVOLVED?
HOW DO I SELECT THE BEST OF ITS TYPE?
WHERE CAN I FIND OUT MORE ABOUT IT?
QUESTIONS AND ANSWERS
CHAPTER 21: REITS (REAL ESTATE INVESTMENT TRUSTS)
WHAT IS IT?
WHEN IS THE USE OF THIS TOOL INDICATED?
ADVANTAGES
DISADVANTAGES
TAX IMPLICATIONS
ALTERNATIVES
WHERE AND HOW DO IT GET IT?
WHAT FEES OR OTHER ACQUISITION COSTS ARE INVOLVED?
HOW DO I SELECT THE BEST OF ITS TYPE?
WHERE CAN I FIND OUT MORE ABOUT IT?
QUESTIONS AND ANSWERS
CHAPTER 22: REAL ESTATE MORTGAGE INVESTMENT CONDUITS (REMICs)
WHAT IS IT?
WHEN IS THE USE OF THIS TOOL INDICATED?
ADVANTAGES
DISADVANTAGES
TAX IMPLICATIONS
ALTERNATIVES
WHERE AND HOW DO I GET IT?
WHAT FEES OR OTHER ACQUISITION COSTS ARE INVOLVED?
HOW DO I SELECT THE BEST OF ITS TYPE?
WHERE CAN I FIND OUT MORE ABOUT IT?
QUESTIONS AND ANSWERS
CHAPTER 23: ASSET-BACKED SECURITIES
WHAT IS IT?
WHEN IS THE USE OF THIS TOOL INDICATED?
ADVANTAGES
DISADVANTAGES
TAX IMPLICATIONS
ALTERNATIVES
WHERE AND HOW DO I GET IT?
WHAT FEES OR OTHER ACQUISITION COSTS ARE INVOLVED?
HOW DO I SELECT THE BEST OF ITS TYPE?
WHERE CAN I FIND OUT MORE ABOUT IT?
QUESTIONS AND ANSWERS
CHAPTER 24: OIL AND GAS
WHAT IS IT?
WHEN IS THE USE OF THE TOOL INDICATED?
ADVANTAGES
DISADVANTAGES
TAX IMPLICATIONS
ALTERNATIVES
WHERE AND HOW DO I GET IT?
WHAT FEES OR OTHER ACQUISITION COSTS ARE INVOLVED?
HOW DO I SELECT THE BEST OF ITS TYPE?
WHERE CAN I FIND OUT MORE ABOUT IT?
QUESTIONS AND ANSWERS
CHAPTER 25: GOLD AND OTHER PRECIOUS METALS
WHAT IS IT?
WHEN IS THE USE OF THIS TOOL INDICATED?
ADVANTAGES
DISADVANTAGES
TAX IMPLICATIONS
ALTERNATIVES
WHERE AND HOW DO I GET IT?
WHAT FEES OR OTHER ACQUISITION COSTS ARE INVOLVED?
HOW DO I SELECT THE BEST OF ITS TYPE?
WHERE CAN I FIND OUT MORE ABOUT IT?
QUESTIONS AND ANSWERS
CHAPTER 26: COLLECTIBLES
WHAT IS IT?
WHEN IS THE USE OF THIS TOOL INDICATED?
ADVANTAGES
DISADVANTAGES
TAX IMPLICATIONS
ALTERNATIVES
WHERE AND HOW DO I GET IT?
WHAT FEES OR OTHER ACQUISITION COSTS ARE INVOLVED?
HOW DO I SELECT THE BEST OF ITS TYPE?
WHERE CAN I FIND OUT MORE ABOUT IT?
QUESTIONS AND ANSWERS
CHAPTER 27: LIMITED PARTNERSHIPS
WHAT IS IT?
WHEN IS THE USE OF THIS TOOL INDICATED?
ADVANTAGES
DISADVANTAGES
TAX IMPLICATIONS
ALTERNATIVES
WHERE AND HOW DO I GET IT?
WHAT FEES OR OTHER ACQUISITION COSTS ARE INVOLVED?
HOW DO I SELECT THE BEST OF ITS TYPE?
WHERE CAN I FIND OUT MORE ABOUT IT?
QUESTIONS AND ANSWERS
CHAPTER 28: PRIVATE PLACEMENTS AND VENTURE CAPITAL
WHAT IS IT?
Private Placements
Venture Capital
WHEN IS THE USE OF THIS TOOL INDICATED?
ADVANTAGES
DISADVANTAGES
TAX IMPLICATIONS
ALTERNATIVES
WHERE AND HOW DO I GET IT?
WHAT FEES OR OTHER ACQUISITION COSTS ARE INVOLVED?
HOW DO I SELECT THE BEST OF ITS TYPE?
Private Placements
Venture Capital
WHERE CAN I FIND OUT MORE ABOUT IT?
QUESTIONS AND ANSWERS
CHAPTER 29: AMERICAN DEPOSITARY RECEIPTS
WHAT IS IT?
WHEN IS THE USE OF THIS TOOL INDICATED?
ADVANTAGES AND DISADVANTAGES
TAX IMPLICATIONS
ALTERNATIVES
WHERE CAN I FIND OUT MORE ABOUT IT?
CHAPTER 30: INVESTMENT RISK
WHAT IS IT?
Causes of Variability in an Investment’s Expected Return
TYPES OR SOURCES OF RISK
INVESTMENT RISK MANAGEMENT
CHAPTER 31: MEASURING INVESTMENT RISK
WHAT IS IT?
PROBABILITY DISTRIBUTIONS
STANDARD DEVIATION AND VARIANCE
SEMI-VARIANCE
COVARIANCE AND CORRELATION
BETA
R-SQUARED (R2)
SKEWNESS
KURTOSIS
SKEWNESS AND KURTOSIS COMBINED
HOW IT IS DONE – AN EXAMPLE
WHERE CAN I FIND OUT MORE?
CHAPTER 32: TIME VALUE CONCEPTS
WHAT IS IT?
HOW DOES IT WORK?
WHEN IS THE USE OF THIS TECHNIQUE INDICATED?
ADVANTAGES
DISADVANTAGES
HOW IS IT IMPLEMENTED?
Basic Time Value Formulas
Present Value Calculations
Overview
Present Value of Future Lump Sum Payment
Present Value of Perpetual Annuity
Present Value of Ordinary Annuity
Present Value of Annuity Due
Future Value Calculations
Future Value of Present Lump Sum
Future Value of Ordinary Annuity
Future Value of Annuity Due
Annuity Payment Calculations
Overview
Ordinary Annuity Payment for a Given Present Value
Annuity Due Payment for a Given Present Value
Periodic Payment for a Perpetual Annuity (n = 8)
Ordinary Annuity Payment for a Given Future Value
Annuity Due Payment for a Given Future Value
Number of Periods or Term Calculations
Overview
Number of Periods for Present Lump Sum Value to Reach Future Value
Number of Periods Present Value Will Provide Ordinary Annuity Payments
Number of Periods Present Value Will Provide Annuity Due Payments
Number of Periods of Ordinary Annuity Payments to Reach Future Value
Number of Periods of Annuity Due Payments to Reach Future Value
Caveat: Final Payment Adjustment When n Is a Non-Integer Value
Rate-Of-Return Calculations
Rate of Return Required for Lump Sum Present Value to Reach Future Value
Rate of Return on Annuities
Rate Conversions, Compounding Periods, and Effective Interest Rates
Stated Annual Rate
Effective Annual Rate
Equivalent Annuities/Loan Payments
ADJUSTING FOR INFLATION OR GROWTH FACTORS
Overview
Inflation/Growth-Adjusted Rate of Return
Inflation/Growth Adjusted ROR, PVs and FVs
Inflation/Growth Adjusted ROR and Annuities
ADJUSTING FOR TAXES
Overview
Tax Leverage
Up-Front Deductions or Exclusions
Tax-Deferred Earnings or Benefits
Nondeductible Contributions and Tax-Deferred Earnings
Applying the Formulas
Adding Capital Gains or Partially Tax-Deferred Income
Present Value Formula
Future Value of Annuity Formulas
Present Value of Annuity Formulas
Inflation/Growth Adjusted Formulas
Inflation/Growth Adjusted Rate of Return
Inflation/Growth-Adjusted Payment Streams
WHERE CAN I FIND OUT MORE?
CHAPTER 33: MEASURING INVESTMENT RETURN
WHAT IS IT?
HOW DOES IT WORK?
ADVANTAGES
DISADVANTAGES
WHEN IS THE USE OF THIS TECHNIQUE INDICATED?
RATE OF RETURN CONCEPTS
Total Return
Holding-Period Return
Annualized Returns
Simple and Arithmetic Average Annual Returns
Compound and Geometric Average Annual Returns
Simple Versus Compound and Arithmetic Versus Geometric
Nominal and Real (Inflation-Adjusted) Returns
Internal Rate of Return and Net Present Value
Time-Weighted and Dollar-Weighted Annual Returns
After-Tax Return and Taxable-Equivalent Return
Risk-Adjusted Returns
HOW IS IT IMPLEMENTED
I. Net Present Value
How to Compute Net Present Value
II. Internal Rate of Return
How to Compute Internal Rate of Return
Shortcomings of the IRR Method
III. Modified Internal Rate of Return Methods
IV. Pay Back Period
V. Cash on Cash
VI. Using Analytical Methods to Compare Investments
Independent Versus Mutually Exclusive Investments
Incremental Analysis Methodology
WHERE CAN I FIND OUT MORE?
QUESTIONS AND ANSWERS
CHAPTER 34: MEASURING YIELD
WHAT IS IT?
Fixed-Income Terminology
Bond Pricing
Market Interest Rates
Bond Yields
Interest Rate Volatility
Special Cases
WHERE CAN I FIND OUT MORE?
QUESTIONS AND ANSWERS
CHAPTER 35: SECURITY VALUATION
WHAT IS IT?
DISCOUNTED CASH FLOW METHODS
Discounted Dividend Models
Discounted Free Cash Flow Models
Capitalized Earnings
MARKET BASED METHODS
Price/Earnings Approach
Price/Free Cash Flow Approach
Price/Sales Approach
ASSET BASED METHODS
WHERE CAN I FIND OUT MORE ABOUT IT?
QUESTIONS AND ANSWERS
CHAPTER 36: ASSET PRICING MODELS
WHAT ARE THEY?
PORTFOLIO THEORY AND ASSET PRICING MODELS
Markowitz Portfolio Theory
Capital Market Line
Capital Asset Pricing Model
Arbitrage Pricing Theory
Option Pricing Models
OPTIONS PRICING FUNDAMENTALS
Call Options Pricing
The Binomial Model
Black-Scholes Model
Put Option Pricing
WHERE CAN I FIND OUT MORE ABOUT IT?
QUESTIONS AND ANSWERS
CHAPTER 37: PORTFOLIO MANAGEMENT AND MEASUREMENT
WHAT IS IT?
THE INVESTMENT PROCESS
Client Lifecycle Analysis
Client Risk Tolerance
THE INVESTMENT POLICY STATEMENT
Return Measures For Portfolio Evaluation
Risk-Adjusted Performance Measures
Selecting an Appropriate Benchmark
Risk-Adjusted Measures and Investment Policy
WHERE CAN I FIND OUT MORE ABOUT IT?
QUESTIONS AND ANSWERS
CHAPTER 38: ASSET ALLOCATION AND PORTFOLIO CONSTRUCTION
WHAT IS IT?
ASSET ALLOCATION
Modern Portfolio Theory and Asset Allocation
Strategic Asset Allocation
Tactical Asset Allocation
Monte-Carlo Simulation
INDIVIDUAL SECURITY SELECTION
Market Efficiency
Strong Form EMT
Semi-Strong Form EMT
Weak Form EMT
EMT Anomalies
Active Security Selection
WHERE CAN I FIND OUT MORE ABOUT IT?
QUESTIONS AND ANSWERS
CHAPTER 39: INVESTMENT STRATEGIES
WHAT IS IT?
SECURITY SELECTION
Fundamental Analysis
Company Fundamentals
Company Ratios
Fundamental Screening
Technical Analysis
TIMING OF INVESTMENT PURCHASES AND SALES
Market Timing
Buy and Hold
Passive Investing or Indexing
WHERE CAN I FIND OUT MORE ABOUT IT?
QUESTIONS AND ANSWERS
CHAPTER 40: FORMULA INVESTING
WHAT IS IT?
DOLLAR COST AVERAGING
DIVIDEND REINVESTMENT
FIXED-INCOME STRATEGIES
Immunization
Ladder Portfolio
Barbell Strategy
WHERE CAN I FIND OUT MORE ABOUT IT?
QUESTIONS AND ANSWERS
CHAPTER 41: HEDGING AND OPTION STRATEGIES
WHAT ARE THEY?
WHEN IS THE USE OF SUCH DEVICES INDICATED?
HOW IS IT DONE?
Fundamental Investment Principles
Sales, Stop-Loss Orders, and Short Sales
Stop-Loss Orders
Short Sales
Short Sales against the Box
Short Sales of Close Substitutes
Short Sale of Exchange-Traded Funds
Selling a Forward Contract or Futures Contract
Offsetting Notional Principal Contract or Equity Swap
Pre-Paid Forward Sale
Final Note
Options, Futures, and Other Derivatives
Nature of the Derivatives Markets
Options, Spanning, and Synthetics
Option Premiums
Option Strategies
Long Call
Short Call
Long Put
Short Put
Covered Call
Protective Put
Bull Spread
Bear Spread
Collar
Straddle
Strangle
Butterfly
Calendar Spread
WHAT ARE THE TAX IMPLICATIONS?
Constructive Sale Rules
Avoiding Constructive Sale Treatment
Straddle Rules
Straddle Defined
Straddle Rule Tax Implications on Closing the Straddle
Economics of Primary Hedging Strategies
Conclusion
WHERE CAN I FIND OUT MORE?
CHAPTER 42: LEVERAGING INVESTMENT ASSETS
WHAT IS IT?
HOW DOES IT WORK?
WHEN IS THE USE OF THIS TECHNIQUE INDICATED?
ADVANTAGES
DISADVANTAGES
HOW IS IT IMPLEMENTED?
WHAT ARE THE TAX IMPLICATIONS?
WHERE CAN I FIND OUT MORE?
QUESTIONS AND ANSWERS
CHAPTER 43: TAXATION OF INVESTMENT VEHICLES
WHY TAXES ARE IMPORTANT T0 THE INVESTOR
ACQUISITION AND DISPOSITION ISSUES
Basis
At Risk Rules
Property Acquired From a Decedent
Property Acquired by Gift
General Business Tax Credits
Timing of Reporting Gain or Loss upon Disposition
Installment Sales
Character of Gain or Loss
Holding Period
INCOME AND EXPENSES WHILE THE INVESTMENT IS HELD
Income Defined
Character of Income or Loss
Passive Activity Income or Loss
Deductible Expenses
Deductibility of Interest
Deductibility of Investment Expenses Other than Interest
Timing of Recognition of Income and Expenses
Constructive Receipt
Economic Benefit
Restricted Property
Prepaid Deductions
THE FEDERAL INCOME TAX RATE STRUCTURE
Ordinary Income Tax Rates
Capital Gain Tax Rates
Qualified Dividend Income
Exclusions
Dividends from Mutual Funds and REITs
Alternative Minimum Tax
AMT Computation
Adjustment to Taxable Income
Tax Preferences
Alternative Minimum Tax Credit
Tax Planning for the AMT
The Impact of Capital Gains
The “Kiddie Tax” – Unearned Income of Certain Minor Children
SELECTED INVESTMENT TAX ISSUES
Original Issue and Market Discounts and Premiums
Discounts
Premiums
Short-Sale Rules
Short-Term or Long-Term Capital Gain or Loss
Reporting Substitute Payments
Wash Sale Rules
Options and Futures Contracts
Warrants
Substantially Identical
More or Less Stock Bought than Sold
Loss and Gain on Same Day
Dealers
Short Sales
Residual Interests in a REMIC
How to Report
Constructive-Sale Rules
History
Current Tax Law
Constructive Sales
Related Parties
Exception for Nonmarketable Securities
Exception for Certain Closed Transactions
Appreciated Financial Position
Certain Trust Instruments Treated as Stock
Sale of Appreciated Financial Position
Straddle Rules
Loss Deferral Rules
How to Report Gains and Losses (Form 6781)
Coordination of Loss Deferral Rules and Wash Sale Rules
Holding Period and Loss Treatment Rules
Mixed Straddles
CHAPTER 44: TAX-EFFICIENT INVESTMENT STRATEGIES
TAX EXEMPT EQUIVALENT (TAXABLE EQUIVALENT YIELD)
ORDINARY INCOME, CAPITAL GAIN, AND QUALIFIED DIVIDENDS
TIMING OF CAPITAL GAIN OR LOSS
MUTUAL FUNDS
CHAPTER 45: INVESTMENT STRATEGIES FOR TAX-ADVANTAGED ACCOUNTS
ROTH IRA VS. TRADITIONAL IRA
CONVERTING TRADITIONAL IRA TO ROTH IRA
OTHER IRAS AND QUALIFIED PLANS
MEASURING THE EFFECTS OF TAX LEVERAGE
Comparing Alternative Investments
Implications and Conclusions
EXAMPLE: GEORGE’S RETIREMENT PLANS
WHICH ASSETS SHOULD BE IN RETIREMENT PLANS?
The Issue
Deductible Contributions
DISTRIBUTIONS OF EMPLOYER SECURITIES WITH NET UNREALIZED APPRECIATION
Overview
Taxation
Planning