January 16, 2009

Currency trading training – Each shareholder then reports his share of the taxable long-term gain retained by the company, takes credit or claims refund for the 25 per cent tax paid for his account by the company and increases the cost basis of his stock for tax purposes by 75 per cent of his share of the undistributed capital gain.

The tax effect on the individual is substantially the same as if gains were distributed to him, taxes were paid at the applicable personal rate, and then 75 per cent of the gain was immediately reinvested by the stockholder in the investment company. A major advantage of this tax provision is that those shareholders whose long-term capital gains tax rates are less than 25 per cent or who are exempt from tax or who have offsetting losses would be able to utilize all or part of the tax paid for their accounts to meet other federal income tax obligations; and they could claim a refund for any unused portion of such taxes. The net result of the various tax regulations described is that a layer of taxes is avoided under the "conduit theory." In other words, the tax law provides that the composite tax burden to the company and the shareholder will be comparable to that which would be borne by the direct investor alone. A number of companies with substantial capital losses on securities owned have elected to be taxed as ordinary corporations. In such cases, dividends may be tax-free in the hands of stockholders, to be applied to the reduction of the cost of their stockholdings.

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