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The Special Dividend Tax Rules

November 27, 2012

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Jon

There has been a flurry of special dividend announcements recently. Many from companies that don’t normally pay a dividend. Which shouldn’t be surprising really. Which leaves shareholders with a nice end of the year dividend payment. Of course, even special dividends are taxed. But how is it viewed for tax purposed?

Regularly scheduled dividend payments are considered an earnings distribution. Because of this the payments are viewed as ordinary income and taxed accordingly. However, special dividends are not always viewed the same way. Which complicates things. Any tax implications will depend on how the company classifies the special dividend.

What Is A Special Dividend?

A special dividend is a one time dividend payment to shareholders outside of any regularly scheduled dividends, if there are any. Companies usually declare a one time dividend because of very strong earnings or if there is an excessive amount of cash on the balance sheet. But it can be issued for a number of other reasons too. Continue Reading…
Happy Hour: Happy Thanksgiving And Twinkies

November 23, 2012

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Jon

Welcome to the end of the week and another edition of Happy Hour! Just sit back, relax, and enjoy your end of the week roundup of all things interesting in the land of money.

Happy Thanksgiving

I’m a day late in the Thanksgiving wishes. So Happy Black Friday. I did find some interesting Thanksgiving Financial Trivia. It seems Thanksgiving time is steeped in a history of debt and high interest rates. The Pilgrims had to borrow to get here and at 30-70% rates. Just something to think about while you’re waiting in line for all those special deals today.

Twinkies Bubble

We lost an icon recently when Hostess closed it’s doors for the last time. The everlasting Twinkie and other Hostess brands were tasty treats of urban legend. When the news broke, Twinkie prices spiked as customers feared losing the inside out pound cake. There’s no need to worry though. There are already suitors for the name brands and recipes. Which still have value. The rush on stores proved it. You Twinkie addicts will get your snacktastic fix soon. Continue Reading…
What Is An ADR (American Depositary Receipt)?

November 20, 2012

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Jon

There are many ways to invest in foreign companies. International funds are the most common. But what about individual stocks? An ADR is an easy way to buy foreign stocks through your broker.

Define ADR

American Depositary Receipt or ADR is a type of security that represents shares of a foreign company. A U.S. depositary bank buys the foreign stock and issues ADRs in the U.S. market. Each ADR represents one or more shares (or a fractional share) of a foreign stock and trades at a price equal to the foreign stock.

This process makes it easier for investors to gain access to foreign companies like: BP, Toyota (TM), or Nokia (NOK). Which are all American Depositary Receipts traded on the NYSE. Continue Reading…
Happy Hour: iPad Nano And Facebook Drama

November 16, 2012

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Jon

Welcome to the end of the week and another edition of Happy Hour! Just sit back, relax, and enjoy your end of the week roundup of all things interesting in the land of money.

iPad Nano

A look into the new iPad mini TV Ads show where Apple is heading. Is Apple becoming too obvious. What’s next for the iPad, iPad Mini, then iPad Nano?

In the past Apple used the software approach to its device upgrades. Just add one or two big changes each year with minor tweaks (bug fixes), call it 2.0 or 3.0 and charge its customers full price for the new product. Technology advances over the past decade made it easy as computer chips got smaller, hard drive memory grew and both got cheaper. It was an easy sell. The iPod evolution explains this concept well. It also provided a hint of where Apple was heading. First came iPod, then the iPod Mini, and finally the iPod Nano.

It may have worked for the iPod, but can you really call a smaller version of the iPad, innovative? It hasn’t introduced any mind-blowing products or upgrades in a year. Which was a regular occurrence in the past. So, has the well run dry? Or is the Apple TV its saving grace? Continue Reading…
What Is A Trailing Stop Order?

November 15, 2012

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Jon
One of the hard parts of investing is knowing when to sell once you have a profit. Another is selling too early and missing out on more profit. And, of course, through all that, you still want to protect your profit so it doesn’t become a loss. Which all sounds complicated, but a trailing stop order covers all of this and more.

Define Trailing Stop Order

A trailing stop order is just a stop order with a built-in trigger or trailing price. Unlike a stop order that has a specific, fixed activation price, a trailing stop order has a moving activation price based on a stop parameter. Once triggered, the trailing stop order becomes a market order and the stock is sold at the next best available price. That stop parameter can be set one of two ways:
- By Price –as a dollar amount.
- By Percentage – as a percentage of the current price.
Please don’t confuse price with percent when placing an order. There is a big difference between 10% and $10. And can lead to lower profits or even a loss. Continue Reading…
What Is The Wash Sale Rule?

November 13, 2012

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Jon

The tax code is constantly changing. Sometimes you can get a leg up on next year’s tax changes by taking advantage of any current favorable tax code.

In this case, it involves selling losing investments for a tax deduction. The goal, of course, is to lower your tax bill at the end of the year. Right or wrong, this strategy can fail if you don’t know the wash sale rule.

The Wash Sale Rule

The concept is fairly simple. You own a stock (bond or fund) that drops in value. The tax code may allow you to deduct that loss, but only if you sell the stock. Which is the problem, because you really want to keep it. So you come up with this diabolical scheme to sell the stock for the tax deduction and then buy it back. Continue Reading…