SmartInMoney

 
SECURITIES


First What is cost basis? Cost basis is, generally, the price you paid for your shares. This includes adjustments such as reinvested dividends and capital gains, as well as any sales commissions or transaction fees.

Why you need to calculate cost basis? Keeping track of your cost basis is an important step in determining your capital gains or losses on sales of shares. The IRS requires you to report your gains or losses for shares sold when you file your annual tax return.

What cost basis methods are available? The cost basis method you use can affect the capital gains or losses when you sell shares. In turn, it can also influence how much you owe in federal taxes. Therefore, it's important to give thoughtful consideration to your tax situation when choosing a method. Read more

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Dividend Paying-Stocks for Non-Taxable Account

There's a lot to love about dividend-paying stocks.

The 2011 is marked with uncertain economic environment. In this situation, a company's ability to show investors the money is an important indication of its financial ability.

In a period of ultra low interest rates like the current one, many dividend-paying stocks offer higher yields than bonds as well as the ability to increase those dividends over time. That gives dividend payers a better shot at combating inflation over the long haul than most bonds, whose fixed coupon payments might be eaten up by inflation.

Last but not least, the tax treatment on dividends is currently quite low by historical standards. Through the end of 2012, those in the 25% tax bracket and above will pay a 15% tax rate on “qualified dividends”, while those in the 10% and 15% tax brackets will owe no taxes at all on their qualified dividend payouts. Before their currently low tax treatment went into effect, dividends were taxed at the investor's ordinary income tax rate. The higher dividend tax treatment is scheduled to return to pre-2003 levels in 2013, which is one reason investors should consider taking maximum advantage of tax-sheltered wrappers such as IRAs and 401(k)s for their dividend payers. Read more

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The most popular interest rate swaps are fixed-for-floating swaps, also called as vanilla interest rate swaps, which is an exchange of interest payments on a specific principal amount. It involves exchanging a fixed amount per payment period for a payment that is not fixed. The floating side of the swap would usually be linked to another interest rate, often a 3-month or 6-month LIBOR as its floating rate. In an interest rate swap, the principal amount is never exchanged; it is just a notional principal amount. Read more