A personal financial accounting method that, when used properly, can help reduce capital gains realized for an investor who purchased multiple sets of a stock or mutual fund. In turn, the investor's total tax paid in a given tax year is also reduced. In order to use the specific-shares method, the investor needs to keep careful records - particularly the cost basis - of each stock or mutual fund purchase. Then he/she must provide detailed information on which particular shares are to be sold to the broker managing the investor's account. Here's an example:An investor purchases 50 shares of Company XYZ at a price of $30 per share on June 15, 2001. A year later, the shares of Company XYZ have depreciated in value to $10 per share, so the investor decides to purchase 60 more shares. Two years after that, the value of Company XYZ shares have appreciated in price to $90 per share. The investor decides to sell 50 of her shares and realize a profit, but still hold onto the rest as she expects Company XYZ shares to continue to rising in price. Using the specific-shares method to minimize the gains realized on her sale of XYZ, the investor calls her broker and asks him specifically to sell the 50 shares of Company XYZ that were purchased on June 15, 2001. These shares were more expensive, so the capital gain realization is minimized: the cost basis of these shares is $1,500 ($30*50 shares), so the investor realizes a capital gain of $3,000 ($90*50 shares - $1,500). If the investor had sold 50 of the shares she purchased at $10 per share - which would have a cost basis of $500 ($10*50), she would be liable for a capital gain of $4,000 ($90*50 - $500).
An IRA held in the name of a legal guardian or parent on behalf of either a child under the age of 18-21 (depending on state legislation) or an individual who is incapable of handling finances due to physical or mental disability. The guardian is responsible for signing documents on behalf of the minor or special-needs adult. The responsibilities of the guardian cease once the child is no longer a minor or until the adult is able to handle his or her finances.
A method of keeping track of all items in an inventory. Specific identification inventory valuation is often used for larger items such as furniture or vehicles, but it is used to identify specific securities as well. This method of identification allows investors to reduce or offset capital gains by picking a specific lot of securities to be used as basis for a sale. For example, suppose that Jane owns 1,000 shares of ABC company, a volatile small cap manufacturer. She bought 400 shares at $40 per share, 300 shares at $60 per share and the remaining 300 shares at $20 per share. Jane then sells 300 shares at $70 per share. Using the method described above, Jane can match the shares she sold with the 300 shares she purchased at $60 per share, because the cost of specific securities is easy to identify.
Pensions earned while working in the United Kingdom's public sector between 1978 and 1997. During those years, the UK’s public sector pension plan was contracted out and the pensions earned are handled differently than other years. The amount of pension earned during these years is supposed to be roughly equivalent to the amount an employee would have otherwise earned. The guaranteed minimum pension applies only to pensions earned during the specified years. If a public sector employee earned income before or after the specified years, in addition to during the specified years, the different time periods of the pension will be calculated separately. After April 6, 1997, guaranteed minimum pensions no longer accumulated and the system was replaced.
Children who have been determined to require special attention and specific necessities that other children do not. The state decides upon this status and offers benefits that follow a special needs child because it is believed the child will not be adopted if assistance is not provided. Special needs children typically receive some sort of additional tax credit or deduction for the guardian.
A rider on a variable annuity, which guarantees the minimum amount received by the annuitant after the accumulation period, or a set period of time, is either the amount invested or is locked in gain. This protects the value of the annuity and the annuitant from market fluctuations. This benefit is optional to an annuity for an added cost, which varies by each firm. The GMAB will be used only if the market value of the annuity is below the minimum guaranteed value. In some cases, the cumulative costs of the benefit are returned to the annuity if the annuity value is higher than the minimum, removing the need to use the rider.
The levy assessed against the portion of a property that has been condemned by a public authority. The special assessment tax will reduce the amount of compensation awarded to the property owner because the owner is considered to have also benefited from the improvement. A public authority can only make a partial condemnation it needs to make way for a public improvement. If the amount of the tax exceeds the compensation, then the difference is added to the basis of the property.
Laws designed to protect the value of a home from property taxes and creditors following the death of a homeowner spouse. A homestead exemption can be found in state statutes and constitutional provisions across the U.S. and is an automatic benefit in some states. In states where the homestead protection is not automatic, homeowners must file a claim which must be re-filed when moving primary residences. The primary features of homestead exemptions are typically meant to provide shelter for the surviving spouse while preventing the forced sale of a home to meet creditor obligations and property taxes. Most homestead exemptions use a monetary value to determine property tax protection, implementing a progressive-style tax to home value in order to assure that homes with lower assessed value benefit the most from the exemption.
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