Benefits Of Tax Free Investments

Investments. “The analysis and process of choosing securities and other assets to purchase.” (Cornett, Adair, & Nofsinger, 2016, p. 7).

An investment in a tax-exempt (municipal) bond with an interest rate of 8 percent is preferable to an investment in a taxable (corporate) bond with an interest rate of 10 percent.

The Best Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated here. The corporate tax rate is 38 percent. Assume all sales revenue is received in cash, all operating costs and income taxes are paid in cash, and all cash flows occur at the end of the year. All net working capital is recovered at the end of the project.

As for the issue of whether or not you should take out another mortgage in order to supplement the conversion of Certificate of Deposits into Municipal Bonds, again, I.R.C. §265(a)(2) comes into effect and disallows any interest deductions sought, thus, removing the profitable advantage offered though the interest rates. In similar situations, such as Wisconsin Cheeseman, Inc. v. United States, 388 F. 2d 420 (1968), the Court ruled against the taxpayer on the claim that the taxpayer was only allowed deductions on the interest of the indebtedness incurred prior to the purchase of the tax exempt investments, meaning that only the interest deductions on the new debt incurred was disallowed. In Wynn v. United States, 411 F. 2d 614 (1969), the taxpayer was also disallowed to claim any deduction for the interest payments on the loans he incurred from the bank, the purpose of which was to expand the amount of tax-exempt securities the taxpayer currently possessed. In Drybrough v. Commissioner, 376 F. 2d 350 (1967), that taxpayer also tries to deduct the interest payments on his leveraged mortgages in order to expand their tax-exempt investment fund, and again, the Court referred to I.R.C. §265(a)(2), which forbids such deductions on the basis that the sum of the interest paid was used to purchase tax exempt securities, thus ruling against the taxpayer. Although the Court’s ruled

A public policy that is a direct impact to local government and its citizens is the Maryland Tax Rain. This recent public policy was implemented in my state of Maryland just a couple of years ago and in my County, this is a new tax fee. This policy has been a controversial proposal since it was proposed on April 2013 by Governor Martin O’Malley. The tax’s purpose is to require local governments to charge a stormwater remediation fee to pay for removing pollutants from rainwater before it reaches the Chesapeake Bay. (Johnson & Wiggins, 2015).

Income trust: the income trust structure involves corporations distributing all or most of their earnings to investors and thereby reduces the corporation’s income tax liability.

This is achieved by the investor bearing the default risk of the issuer on the underlying municipal bond. Specifically, if the issuer of the underlying municipal bond defaults, the investor loses the right to put the bonds to the liquidity bank and the liquidity facility is automatically reduced by the amount of the bonds in default.

| |A sinking fund is a fund to which annual or semiannual deposits are made for the purpose of redeeming a bond issue. |

Investing. To invest in bonds, common or preferred stocks (including securities of any corporate fiduciary or of any affiliated corporation), notes, options, common trust funds, mutual funds, shares of any investment company or trust or other securities, life insurance, partnership interests, general or limited, limited liability company interests, joint ventures, real estate, or other property of any kind, regardless of diversification and regardless of whether the property would be considered a proper estate investment;

Tax laws limiting the amount of losses an investor (usually a limited partner) can claim. Only the amount actually at risk can be deducted.

Many debates have been waged over the decades on what will be taxed, on who shall be taxed and how taxes are collected. Since the 16th Amendment was ratified in 1913, the debate has intensified, centering on how high to make the income tax rate. Most Americans were not concerned since the Amendment was sold to them as something that would only affect corporations and the rich. With ever increasing fervor these corporations created lobbyists to convince Congress to exempt them from some or all of the income tax. The big breakthrough in this was taxing the worker directly with payroll taxes during World War II. This method of collecting income tax was sold to Americans as temporary, but Congress has extended it

Assessing the likelihood of each option and assigning weight to each possibility is an inexact science, but I believe it in unlikely that in the current political climate we will not see both a reduction in the tax rate and an increase in the length of time over which we are required to depreciate capital assets. I have assigned weights to each option with this in mind, and have come up with an average weighted estimate of the net present value of the investment of: $1.7 million.

Should the United States develop a system for free college tuition? Free college tuition would benefit many college students and people interested in getting a higher education because as of the moment the education system is built around money and having to get student loans or scholarships if you cannot come up with tuition up front. It would also take a lot of money out of the economy for the first 10 years or so, mainly because it would take people being able to graduate with a degree for a higher salary for the United States to be able to charge more on taxes to make up for the money lost going to pay for the faculty salary and the student textbook fees. Many are for a free college tuition system but many are also against it because nobody wants to pay even more on taxes but once the people who are against it would see the amount of money begin put back into the economy from the raised taxes there would be able to see the goal of the whole idea. The United States needs to develop a system for free college to give students the ability to get an education they never would have been able to get before and would allow for more money to be brought into the economy from more Americans getting higher paying jobs and make the U.S. a more prosperous nation.

Gittman (2004, pp. 312) divided stock into two types, such as common stock and preferred stock. He also showed that dividends are the outcome of investment. So, common stocks are an ownership claim against primarily real or productive asset (Higgins, 1995), but he also said that if the company prospers, stockholders are the chief beneficiaries, if it falters, they are the chief losers. Smith (1988) presented that stocks are one of the most popular forms of investment. People buy stocks for various reasons: some are interested in the long-term growth of their investment by buying low priced stock of a new company in the hope of substantially growth of share price over the next few years. Another reason he suggested that in a well established firm stockholders expect the stock growth will be stable over the long run. (Smith,1988).

An investment also known as a security is a pledge of money from an individual, government, or cooperation that is expected to accrue additional wealth on top of its original dollar amount. An investment can be a long-term or short-term obligation depending on the investor’s goals and/or assets they choose to invest in. The investment decision process is a two-step process which is necessary to make a sound trustable and efficient investment. The first step involves an evaluation of the investment you as the investor are interested in committing money towards, including characteristics of the security (i.e. how it acts in the current market, how the current/future market may react to this investment and possible returns on your investment). Finally, the management of your investment portfolio, including how often it should be revised, how the performance of your securities should be measured (how often they should be measured), and other important aspects of your current investments. Investing revolves around one basic concept, improving our future, investors invest money today to improve their welfare in the future which is why understanding what an investment is and the process of decision making before investing is extremely important.