Investor Glossary-tax swapInvestor Glossary-tax swapInvestor Glossary-tax swapInvestor Glossary-tax swapInsightful stock market charts - Click here
investor
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Tax Swap

The HTML to link to this page
 

A tax swap is a method of realizing a capital loss that a taxpayer can subsequently claim as a deduction to taxable income. Businesses and individual investors may both use the tax swap strategy. The first half of a tax swap requires the sale of a losing stock investment. The second phase of a tax swap entails the purchase of a higher-priced stock in a similar company in the same or similar industry. Investors also avoid the IRS wash sale rule with this approach to a tax swap, while at the same time keeping their money invested. A possible drawback of a tax swap is that even if the asset purchased is similar to the asset sold, it is not identical and will not perform precisely the same way. Moreover, by shuffling money from one stock to another, a tax swap risks even larger loses than an investor might have intended if the originally owned stock rallies dramatically and/or the new stock falls.



Rate this tax swap definition...

Learn about investing with the Investor Glossary Term of the Day


Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.


Popular Terms: balance sheet, Zero Cost Collar, LIBOR, implied volatility, wholly-owned subsidiary, inflation, per diem, Key Rate Duration, open position, limit order, 144a, ex-dividend, covered put, EBITDA, option premium, retained earnings, annual return, quality assurance, diluted share, labor relations, ex-dividend date, 401a, average price per share, deferred revenue, 1035 exchange, risk management, in escrow, command economy, required rate of return, liquidity ratio, minority interest, cancelled check, current ratio, reverse mortgage, FTSE, 1031 exchange, real GDP, FICO score, stock split, irrevocable trust, margin rate, APR, VIX, phantom income, stock market close, deferred tax, dividends payable, debt service coverage, class C shares


Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Home | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2015 Investor Glossary - All rights reserved - Terms of Use