The Stock Market Blog: September 2019

The Stock Market Blog: September 2019

Mark Skousen predicts the Demise of Jim Cramer ? Of course, it is already September and Jim Cramer continues to be going strong. Even more bizarre is that Skousen offered a contest to see which reader would predict the day that Cramer would end his show. The champion would get a free book. I love Mark Skousen and I used to subscribe to his publication many years back.

Some of his suggestions that I implemented paid for the newsletter several times over. But this type of prediction is off the wall totally. I also like Jim Cramer. The investment community needs a draw for the average indivdual who either doesn’t invest or invests on an extremely limited basis. He makes investing interesting, funny and exciting. The Motley Fools attempted this process but Jim Cramer succeeded. A non-investor won’t watch Wall Street Week however they will watch Jim Cramer’s Mad Money. His show will appeal to young traders. Let’s stop the ‘demise’ predictions and get back to investment predictions.

Securities brokers plus some accountants would be the first to let you know that you don’t want leveraged property in either a Traditional or a Roth IRA because you will have to pay additional fees, specifically Unrelated Business Income Tax (UBIT). UBIT was instituted as a genuine way to level the performing field between non-profit and for-profit companies doing similar work. For instance: A Homeowners’ Association “Dairy Glen”, a non-profit corporation, has installed a golf and pool courts because of its residents. These facilities are supported by the HOA dues, paid by the residents of that neighborhood.

At some point the HOA panel decides they are going to open the recreation facilities to the general public and charge admission or offer memberships, all money heading to the HOA accounts back. Later on is “Muscle World, Inc.” a fitness center that offers similar facilities to their members. Muscle World pays taxes like any other corporation but has trouble competing with Dairy Glen because they need to pay taxes.

This is where UBIT enters. The government, in order to force reasonable competition levies UBIT on Dairy Glen because they’re now in a small business that is unrelated to the original business of maintaining neighborhood facilities. Just how does UBIT relate to IRAs? The government will give you tax-deferred status on the income generated by whatever you have in the IRA. However, it isn’t willing to shelter the gains of the income generated by funds brought in to the account by means of financing. The IRA is treated such as a non-profit but the additional funds brought in are not. It is because the IRS doesn’t allow unlimited ability to contribute to a tax-advantaged plan.

The amount of money you can shelter in a IRA is limited by the annual contribution limitations, so by taking out a mortgage, the size is being increased by you of your IRA. For example, if your IRA buys a true home using a mortgage, UBIT shall be assessed on the leveraged portion, not the portion that your IRA contributed. Thus as your IRA takes care of the mortgage, the percentage that incurs UBIT will decrease. UBIT is assessed at corporate tax rates. The IRA will pay the tax, not you. For most leveraged real estate deals, an IRA will not pay UBIT until somewhere within years 4 to 8 because of depreciation.

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1. The web income produced by the leveraged portion of an investment at trust rate. 3. The IRA possesses an operating business such as providing services or goods. Tax is on 100% of the web income using the trust rate. An excellent exercise is to take the same size IRA and compute the gain on a house with zero leverage. Compare this property bought with varying levels of leverage. Estimate the income produced by renting the property, and find out what UBIT may be over the next 4 to 8 years. Before someone talks you out of leveraging a property in a IRA, do the numbers and decide for yourself. It may or might not make sense to use a mortgage but at least you will understand the decisions you make when investing your IRA money.

Dawson elects to use the reasonable value option for these investments. 2017 before reporting any securities deficits or increases, determine Dawson’s net gain for 2017. Assume that the difference between your having value and fair value is due to credit deterioration. Record the journal access, if any, necessary at December 31, 2017, to record the fair value option for the bonds payable.

In both investments, the holding value and the reasonable value of the two investments are the same at December 31, 2017. Elaina’s stock investments does not result in significant influence on the operations of Laser Company. Elaina’s personal debt investment is known as held-to-maturity. 2,500,000. Assume that these investments are believed impaired. 2,950,000, what entries, if any, should be recorded in 2019 related to impairment? 300 on Merchant common stock. 100,000 take note at 6% set interest, interest payable semiannually.

MacCloud now wants to change the notice to a variable-rate be aware. 100,000. At each 6-month period, the variable rate will be reset. 10,000,000 take note at LIBOR, with interest paid annually. The variable rate is reset by the end of each year. 1,000,on December 31 000 note payable, 2016. It decides to change the interest from a fixed rate to adjustable rate and gets into into a swap contract with M&S Corp. The swap contract specifies that Sarazan will get a fixed rate at 7.5% and pay variable with settlement dates that match the eye payments on your debt.