Journal of Finance and Accounting – TanasiJournal

Archive for July, 2011

With the booming property prices of recent years, more and more people are finding themselves facing a large tax bill when they come to sell their investment properties.  However, did you realize that there is a perfectly legal way of deferring payment of such taxes by utilizing the advantageous 1031 tax code that was introduced by the IRS in the early 1990s?

A 1031 exchange is a way of deferring payment of capital gains tax on certain types of real estate.  Normally when an investment or business property is sold, capital gains tax has to be paid.  However, with 1031 exchanges, by replacing the old property with a like-kind property, within set time limits, payment of capital gains tax can be avoided.

Under the 1031 exchange real estate rules, a seller must have held a property for at least one year and a day for it to qualify.  Another requirement is that both old (relinquished) and new (replacement) 1031 exchange properties must be of a like-kind – either rental properties, vacant land, trade, business or investment properties.

1031 exchanges must be completed within strict time limits.  There is a 45 day Identification Period from the transfer of the old property, in which a replacement property must be identified.  The 1031 exchange rules stipulate that the exchange must be completed within the 180 day Exchange Period.

The 1031 exchange real estate issues are complex, so it is imperative to seek professional advice from a tax advisor or qualified intermediary who can assess your specific circumstances and explain other issues such as the reverse 1031 exchange or TiC rules.  With careful financial planning, you can reinvest your capital gains in future real estate investments, thereby allowing you to leverage your money more efficiently and to reap greater financial benefits.

Before you open a new bank account, you have to think about some considerations, in order to make sure that it will meet your requirements. Community banks are generally possessed by a person in certain community. Usually the focus of the banks is in business. They usually understand the needs of local community, as they also work as small business bank. If you have a business and need some loans, it is a good idea to know the advantage of banking with a community bank, rather than working with bigger banks.

Community banks provide you the basic services of banking, such as savings account, business checking account, mortgage, loans, safe deposit and the like. Smaller banks are usually reachable, so you can reach it many areas; as usually bigger banks are located in dense areas. The other thing that you would like from the community banks is it concerns about personal relationships, unlike bigger banks that focus on technology. The regulation of community bank is handled by the same laws that take care of the bigger banks. Your money is also safe still as it is guaranteed by the FDIC. So, when you are about to create a new bank account, you should consider the community banks rather than the big ones.

There are so many Forex trading strategies out there that it’s not surprising so many people don’t know where to start. But actually, all of those strategies are some combination of two different techniques: fundamental or technical analysis.

A fundamental analyst looks at a nation’s entire financial picture to guide her trades, studying international macroeconomics and the forces that drive the supply of and demand for a currency. There are five of these factors:

• is that country’s government in good financial shape or in the red, and what is their financial policy (pro-business, labor, etc.)

• the balance of imports versus exports, which directly affects a nation’s money supply

• the growth of that country’s real gross domestic product (GDP); in other words, that nation’s purchasing power

• interest rate levels

• inflation level; in other words, how high are prices

These last three are all relative, which means they are compared to those same measurements for other countries to determine their strength or weakness, rather than considered as stand-alone numbers.

The fundamental analyst looks at all these factors and balances them against each other to determine whether a nation’s currency will appreciate or depreciate. Of course, as the Forex market trades the currency of one nation against that of another, the fundamental analyst cannot simply study the economic picture of one country; she must study both of them, and then compare them to determine which paints a more compelling financial picture.

The technical analyst, on the other hand, looks only at the charts. He looks at the price of a currency pair (or any other commodity, such as oil prices or stocks) and sees how it has varied through time, examining the patterns it has drawn with an eye to predicting what it might do in the future.

Technical analysis is flexible. It works the same way in any market with charts (Forex, stocks, commodities, etc.). Once you learn how it’s done, you can apply it in other markets and get the same results.

Fundamental analysis, on the other hand, is not flexible, because it looks at the economic data for each nation individually. The financial numbers for Great Britain, after all, have nothing to do with those for Japan or New Zealand, and the fundamental analyst cannot take her studies to another market. She must study one currency pair and learn its two nations’ economies intimately if she is to be successful with this technique.

That said, fundamental analysis is good for understanding what ought to happen and for predicting the long-range trend of a currency pair. It’s also true that many profitable trades are made immediately after economic announcements, when savvy traders jump into the market while everyone else is still gasping over the numbers.

On the other hand, technical analysis can give you a specific strategy for a trade, including entry and exit points and where to place your stops. It requires less time to learn than fundamental analysis, and works well for shorter trends and individual trades.

The most successful traders use a combination of these two techniques, combining chart analysis with the timing provided by economic announcements to get the best of both worlds.