About This Chapter
Tax Treatment of Equity Securities Transactions - Chapter Summary
Through this chapter, you can gain a comprehensive review of topics related to tax treatment of equity securities transactions. You'll examine stock dividends, taxes, and performance. Across the lessons included in the chapter, multiple types of securities are discussed, including inherited securities, gifted securities, when-issued securities, and conversion securities. The lessons also show how to calculate capital gains and losses, with examples provided showing the calculations.
By studying this chapter, you can expect to achieve the following learning objectives:
- Differentiate between short-term and long-term capital gains taxes
- Discuss the tax treatment of qualified and non-qualified dividend distributions
- Detail IRS rules regarding tax-loss harvesting
- Calculate holding period yield
- Find the cost basis per share for assets
- Explain the LIFO and FIFO tax lot identification methods
- Understand IRS codes 301, 316, 1091, 1233
These lessons were crafted by our knowledgeable instructors to be informative yet easy to understand. This chapter includes multiple types of resources, including text and video lessons, plus self-assessments and review worksheets. For lessons that include calculations, the videos are especially practical since they animate the process, just as if you were in class and your teacher was writing out the calculation on the board!
1. Capital Gains Treatments: Definition & Advantages
Depending on the length of time that you've owned an asset, there are different capital gains taxes that come into effect. This lesson will help you ascertain the difference between short-term and long-term capital gains taxes.
2. How to Calculate Capital Gains: Definition, Formula & Example
The process of calculating capital gains is much the same for corporations and pass-through entities, but there are differences in the tax rates. Let's look at capital gains amounts and how taxes are set for a C Corporation.
3. How to Calculate Capital Losses: Definition, Formula & Example
Every once in a while, a business takes a financial loss when disposing of capital assets. Fortunately, these losses can be used to reduce tax bills. In this lesson, we will review how capital losses work for a corporation.
4. Qualified & Non-Qualified Dividend Distributions
When a company pays dividends, it's a good thing. But it can wreak havoc on people's taxes. This lesson will examine the differences in qualified and nonqualified dividends and the tax implications of each.
5. Tax Loss Harvesting: Rules & Examples
Tax-loss harvesting is an excellent method for reducing tax obligations, but this lesson explains how investors must also be aware of IRS rules and limits when considering this strategy.
6. Holding Period Yield: Formula & Examples
One of the simplest ways to calculate investment performance is by using the holding period yield formula. This lesson will explore the information needed to calculate holding period yield and provide several examples of how to make the calculation.
7. Tax Treatment of When-Issued & Converted Securities
Converted and when-issued securities both have unique features that investors must be aware of to understand their tax treatment. In this lesson, we will review the tax treatments for both converted and when-issued securities.
8. Calculating Cost Basis Per Share for Equity Securities
This lesson will describe the calculation of cost basis per share on purchases, exchange of convertibles for common shares, stock dividends, and inherited or gifted securities.
9. Tax Lot Identification Methods: LIFO & FIFO
In this lesson you will learn the definition of tax lot and how to understand its cost basis. You will also learn how tax lots translate into capital gains and how to identify different tax lots through methods such as LIFO and FIFO.
10. IRS Codes Related to Equity Securities Transactions
This lesson covers some basic key concepts for taxes related to stock transactions before diving deeper into some specific trading strategies and how the IRS charges taxes on these profits.
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Other chapters within the Series 7 Exam: Study Guide & Practice course
- Advertising & Public Communication in the Securities Industry
- The New Issues Market
- New Issue Regulations in the Securities Industry
- Brokerage Account Types & Restrictions
- Retirement Plans & Tax-Advantaged Accounts
- Handling Customer Investment Information & Discretionary Accounts
- Obtaining Supervisory Approvals for Investment Accounts
- Analyzing Customer Investment Profiles
- Analyzing Customer Financial Statements
- Understanding Equity Securities
- Packaged Investment Products
- Variable Life Insurance & Annuities
- Real Estate Investment Trusts
- Direct Participation Programs
- Understanding Options in Investing
- Debt Securities
- Investing in Corporate Bonds
- Municipal Securities
- Municipal Securities Analysis & Regulations
- Registered Hedge Funds
- Asset-Backed Securities
- U.S. Government Agency Securities
- Investment Product Disclosures
- Customer Updates & Record Retention
- Customer Transactions & Confirmations
- Transactional Delivery Obligations & Settlement Procedures
- Investment Disputes & Customer Complaints
- Addressing Margin Issues