Nov
08
2024

What Is a Synthetic CDO?

By | invest, Investing | Comments Off on What Is a Synthetic CDO?

A synthetic CDO is a type of collateralized debt obligation that invests in non-cash derivatives, such as credit swaps, options, and insurance contracts, without owning the underlying assets.

Synthetic CDOs are a type of collateralized debt obligation; both are considered alternative investments and are high-risk due to their complexity. Unlike regular CDOs, which are pooled investments in traditional types of debt, like loans, mortgages, and bonds, synthetic CDOs are invested in non-cash derivatives, which may have a higher risk of default.

Synthetic CDOs are typically not available to retail investors. They are often viewed as controversial, as many have cited them as a contributor to the 2008 financial crisis and subprime mortgage collapse. Here’s a closer look at how synthetic CDOs work and the risks associated with investing in them.

Key Points

•   A synthetic CDO invests in credit derivatives, like credit swaps, without owning underlying assets.

•   Synthetic CDOs have tranches reflecting different risk levels, with higher ratings indicating lower risk as well as lower returns.

•   Due to their complexity and risk, synthetic CDOs are used mainly by institutional investors.

•   Synthetic CDO instruments are considered high-risk, in part due to market risk and the potential for the underlying assets to default.

•   Synthetic CDOs have been criticized for contributing to the subprime mortgage collapse that led to the 2008 financial crisis.

What Is a Collateralized Debt Obligation (CDO)?

CDO and synthetic CDO are two distinct products. A CDO or collateralized debt obligation is a type of derivative investment, meaning it derives its value from an underlying financial asset or pool of assets. Those assets can include loans, bonds, and other types of debt.

How Does a CDO Work?

Many borrowers may be familiar with the term “collateral”; in finance it refers to the security that lenders typically require in return for offering loan products. With CDOs, the collateral would be the payments from the underlying loans, bonds, and other types of debt.

Because debt payments tend to be predictable, the appeal of CDOs is the potential for cash flow. But the risk in these types of financial assets lies in the potential for default.

CDOs are considered derivatives as their value (and price) derives from the underlying bonds and loans. In essence, a CDO is a bundle of debt that’s sold to investors on the secondary market. Rather than individual investors, CDOs are typically sold to institutional investors, such as insurance companies or investment banks.

Different Categories of CDOs

Collateralized debt obligations are considered a type of alternative asset, in that they’re not part of the world of traditional securities like stocks and bonds.

CDO categories may include:

•   Mortgage-backed securities, which are comprised of mortgage loans

•   Asset-backed securities, which invest in non-mortgage debt, such as credit cards or car loans

•   Collateralized bond obligations, which hold a mix of bonds1

CDOs are assigned a tranche or class which signifies the level of risk and reward. The highest rating is AAA, which signifies the lowest risk but correspondingly, the lowest yields.

CDOs and the Financial Crisis

CDOs contributed to the 2008 financial crisis because many of them concentrated holdings in high-risk assets, namely, subprime mortgages. Banks flocked to CDOs because they offered diversification and generated cash flow, which was used to make new loans.

When the housing bubble burst, however, declining home values led many borrowers to default on their subprime loans. That resulted in a rapid cooling of the CDO market and substantial losses for banks.

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Understanding Synthetic CDOs

Synthetic investments attempt to generate cash flow without ownership of the underlying assets. What is a synthetic CDO? It’s an investment vehicle that offers investors exposure to non-cash credit derivatives, such as credit swaps, insurance contracts, or options.

Like regular CDOs, synthetic CDOs are assigned tranches relative to the level of risk they present. The higher the credit rating, the lower the risk, but the return profile is also lower.

How a Synthetic CDO Works

How does a synthetic CDO work? It depends on the underlying investments but for simplicity’s sake, let’s consider a typical synthetic CDO that invests in credit default swaps. A credit default swap is a contract in which a buyer pays a premium to the seller, and the seller agrees to pay a lump sum to the buyer if the underlying credit instrument defaults.

In this type of arrangement, the seller of the synthetic CDO assumes a long position, betting that the underlying assets will perform as expected. The buyer assumes a short position, betting that the underlying assets will default. If the asset defaults, the buyer is entitled to a payout from the seller.

Recommended: Stock Market Basics

Investing in Synthetic CDOs

Synthetic CDOs are not designed for the everyday investor. If you’re opening a brokerage account, for example, you won’t find them offered alongside individual stocks or exchange-traded funds (ETFs).

More often, synthetic CDOs are the domain of institutional investors like banks or insurance companies. That’s appropriate, given how complex — and often confusing — these products are.

Individual investors who are interested in diversifying their asset allocation with alternative investments can gain exposure to credit default swaps outside of a synthetic CDO. For example, you might invest in an ETF or mutual fund that holds credit default swaps as an underlying asset.

There are, however, some stipulations. Venturing into this type of alternative investment is generally not recommended for investors who don’t fully understand how they work or the risks involved.

What Are Alternative Investments?

Alternative investments, sometimes called alts, refer to non-traditional assets that fall outside the realm of stocks, bonds, and cash. Alts may include commodities, real estate, private equity, hedge funds, and other instruments like CDOs.

Alts typically have little or no correlation with traditional asset classes. Thus they can be appealing to some investors because they may offer some portfolio diversification, and the potential for higher risk-adjusted returns.

That said, alts tend to be illiquid, not transparent, not well-regulated, and high risk.

Risks of Investing in Synthetic CDOs

Like most types of alternative investments, synthetic CDOs carry elevated levels of risk for investors.

Some of the most significant risks include:

•   Lack of transparency and limited federal regulation

•   Credit risk and the potential for default of underlying assets

•   Liquidity risk and the difficulties in buying and selling synthetic CDO positions

•   Modeling risk, which can result in incorrect assumptions about the value of underlying assets

•   Market risk, or the risk of changes in the value of underlying assets

While the market has changed in the years since the financial crisis, and federal regulations now exist to protect investors from a repeat of those events, the risks of synthetic CDOs and CDOs in general can’t be discounted.

The Takeaway

Synthetic CDOs are a complicated way to build a portfolio. If you’re looking for a way to diversify, you can invest in stocks, ETFs, private credit, commodities, and even IPOs through an online brokerage account.

SoFi does not offer CDO investments at this time, but it does provide access to a range of alternative investment funds. You can choose what to invest in, based on your risk tolerance and goals.

Ready to expand your portfolio's growth potential? Alternative investments, traditionally available to high-net-worth individuals, are accessible to everyday investors on SoFi's easy-to-use platform. Investments in commodities, real estate, venture capital, and more are now within reach. Alternative investments can be high risk, so it's important to consider your portfolio goals and risk tolerance to determine if they're right for you.


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FAQ

What is the main purpose of a synthetic CDO?

The main purpose of a synthetic CDO is to allow investors to gain exposure to an underlying credit asset without owning it. Synthetic CDOs that invest in credit default swaps allow a buyer and seller to take short and long positions respectively to bet on the behavior and performance of an underlying asset.

How do synthetic CDOs differ from traditional CDOs?

Traditional CDOs invest in debt instruments or securities, such as mortgage loans, credit card debt, or auto loans. Synthetic CDOs primarily invest in credit instruments, such as credit default swaps or options.

What are the risks associated with investing in synthetic CDOs?

Synthetic CDOs are subject to credit risk, market risk, and liquidity risk. If the underlying asset doesn’t perform as expected, that can result in losses for the buyer or seller.

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Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.

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Nov
08
2024

What to Know About Debit Card PINs: Security, Usage, and Best Practices

By | money, Money & Life | Comments Off on What to Know About Debit Card PINs: Security, Usage, and Best Practices

A debit card PIN is its personal identification number or code that allows you to securely conduct transactions, such as ATM withdrawals and purchases at retail locations.

A debit card is tied directly to a bank account. When you make a transaction with your debit card, the money is withdrawn from your account’s available balance. Read on to learn more about how PINs are used, how they can help keep your money safe, and other important details.

Key Points

•  A debit card PIN is a short numeric code used for secure transactions, such as ATM withdrawals and retail purchases.

•  Debit cards can be used without a PIN on credit networks, typically requiring a signature instead.

•  You can create or change your PIN through your bank’s website, app, or branch.

•  Protect your PIN to prevent unauthorized access to your bank account, and report any suspicious activity immediately.

•  If someone knows your PIN, change it promptly to safeguard your account.

Understanding Debit Card PINs

A debit card is a card that is tied to a traditional or online bank account, usually a checking account, that allows you to conduct transactions in person and online.

When you use a debit card, you will usually be required to enter a numeric PIN, usually four digits long. PIN stands for personal identification number, and it is used as an extra level of security for making transactions with your debit card. Because the “n” in PIN stands for “number,” it is technically incorrect to talk about your debit card PIN number, since that would be “personal identification number number,” though many people still commonly refer to a PIN as a “PIN number.”

What Is a PIN and Why It’s Important

A PIN, again, is typically a four-digit number that is used when processing a debit card transaction through the debit network. A PIN helps to ensure the security of transactions used with your debit card. If you lose your debit card, nobody will be able to withdraw money from an ATM without also having your PIN.

How PINs Work With Debit Cards

As noted above, it’s possible to use most debit cards as either a debit card or a credit card, the latter of which can typically be processed without a PIN.

•  If you use your debit card at an ATM, you will need to enter your PIN to withdraw money, check your balance or access your account.

•  When you are using your debit card at a brick-and-mortar merchant, you typically need to enter your PIN. Many locations simply ask you to sign, as detailed below, but others will require you to enter your pin. If you want to get cashback as part of your transaction, you’ll also need to enter your PIN.

•  It’s possible to use your debit card without a PIN, processed through the credit card processing network associated with your card — usually either Mastercard or Visa. While you don’t need to enter your PIN, you will probably be required to sign to complete the transaction if you’re at a brick-and-mortar retailer. Or you might need to type in your address information if you are conducting an online transaction.

•  An important debit card fact: Choosing the “credit” option for your debit card transaction doesn’t mean that you are making a credit card purchase and potentially accruing interest. The transaction is just “put through” in a different way that may take a bit longer to clear. The funds still come straight out of your bank account.

•  However, the fact debit transactions can be processed as credit does mean that if you lose your debit card, you will want to contact your bank to report it lost as soon as possible. That can prevent someone from making unauthorized transactions simply by signing your name.

As you see, how PINs are used with debit cards can vary depending on the location and kind of transaction you are completing.

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Creating and Managing Your PIN

You’ll usually create the PIN for your debit card when you first open your bank account.

•  Sometimes you will choose your own PIN, and in other cases the bank will assign you a PIN. If the bank sends you your PIN, it will often come in an unmarked envelope separate from your debit card. This reduces the risk that both your card and PIN will be intercepted in the mail on their way to you.

•  While you may create or be assigned a debit card PIN when your account is created, you typically have the ability to change your PIN at any time (often via the financial institution’s website or app). When you create or change your PIN, you’ll want to make sure to choose a secure PIN. Don’t choose common PINs like repeated numbers (such as 8888), alternating numbers (as in 2424), your birthdate or anniversary, or the last four digits of your account or card number.

•  If you forget your debit card PIN (yes, it happens), your bank may offer a way to access it via their website or app. If not, you could call customer service for assistance or visit a branch, if your financial institution has them.

One last note about PINs: You should avoid choosing the same PIN for multiple different accounts.

Recommended: How to Deposit a Check

PIN Safety and Security Measures

If someone has access to both your debit card and your PIN, they can access your bank account. That’s why protecting your PIN is one of the most important things that you can do to keep your bank account safe to avoid unauthorized transactions and bank fraud. Follow these guidelines:

•  Never give your PIN out to anyone (or if you have to, quickly change it afterwards).

•  When you’re at an ATM, make sure you physically block anyone that happens to be nearby from being able to see your PIN.

•  If you do think that someone may have access to your PIN or you suspect fraudulent activity, you should change your PIN and contact your bank immediately.

•  If you experience the loss of your card or any unauthorized transactions using your debit card, notify your bank as soon as possible. If you alert them within two business days, you are only responsible for the amount of unauthorized transactions or $50, whichever is less. If you notify your financial institution after those two business days, you could be responsible for up to $500. If you notice unauthorized transactions on your statement, it’s important to contact your bank within 60 days, or you could be liable for the transactions.

These steps can help you to keep your debit card and PIN secure and to avoid loss.

Using Your PIN: ATMs, Point-of-Sale, and Online Transactions

There are different scenarios where your PIN may or may not be required.

•  If you are using a debit card as a credit card, your PIN may not be required. This is because most online transactions are processed using the credit processing network associated with your card (such as Visa or Mastercard). You may be required to sign or, if conducting an online transaction, add other personal details, such as your address.

•  At an ATM, your PIN will be required before you can use your debit card to withdraw cash, check your balance or access your account.

•  If you are making a cardless withdrawal, however, you may or may not need your PIN; the app you are using may have you, say, scan a QR code to get cash at the ATM.

•  If you are using your debit card at a physical point-of-sale terminal at a merchant, your debit card PIN may or may not be required. If you enter your PIN, your transaction will be processed as a debit card, and you likely will not be required to sign the receipt.

•  If you bypass the PIN, your transaction could be processed over the credit network, and you may be asked to sign the receipt to verify the transaction. (A reminder: This doesn’t mean it’s added to your credit card bill; the funds still come from your bank account.)

Understanding the different kinds of transactions you can make with a debit card and its PIN can help you manage your money better and optimize its security.

Recommended: Emergency Fund Calculator: How Much Should You Save?

The Takeaway

A debit card PIN is usually a 4-digit number that helps to ensure the security of your account. In most cases, you can either use a debit card with your PIN (say, at retail locations or to withdraw funds from an ATM) or possibly by signing. Your PIN helps to keep your account secure. If you forgot your debit card PIN or suspect someone else has access to it, contact your bank’s customer service department immediately.

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FAQ

Can I use my debit card without a PIN?

Yes, you can often use your debit card without a PIN. Most debit cards are part of a credit card processing network (such as Visa or Mastercard). That means that you can “run” your card on these networks, without having to enter your PIN. You may be required to sign if completing a transaction in person or, if online, you might have to enter other details, such as your address.

How often should I change my debit card PIN?

One of the main purposes of having a debit card PIN is to help make sure that no unauthorized purchases are made to your account. You’ll typically change your debit card PIN if you lose your card or if you think someone might know your PIN.

What should I do if I think someone knows my PIN?

If you think that someone else knows your debit card PIN, it’s a good idea to change your PIN right away. You may be able to change your PIN through your bank’s website, app, or, if your account is at a brick-and-mortar bank, at a branch. In some situations, your bank may also send you a new debit card with new card numbers to safeguard your account.

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SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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What Is the BRRRR Method in Real Estate? A Comprehensive Guide

By | Home Ownership, mortgage | Comments Off on What Is the BRRRR Method in Real Estate? A Comprehensive Guide

If you’re into real estate investing, and you’re thinking about expanding your portfolio to include multiple rental properties, you may have seen the acronym BRRRR and wondered what it means.

BRRRR — which stands for Buy, Rehab, Rent, Refinance, Repeat — is kind of like house flipping, but on steroids. Instead of reselling a newly rehabbed home for a one-time profit, a BRRRR investor keeps the property and rents it with the goal of generating income while also building equity to make another purchase, and another, and so on.

Read on to learn more about this complicated investing strategy, how it works, and some pros and cons.

Understanding the BRRRR Method

Don’t let the “cool” and easy-to-remember acronym fool you: Successfully executing each step of the BRRRR method can require time and effort, and knowledge about how to invest in real estate, especially in your local market. Here are some BRRRR real estate basics:

BRRRR Meaning

BRRRR is a strategy real estate investors use to keep adding rental homes to their property portfolio. Each of the five letters stands for a step in the process:

•  B – Buy a property that you expect to gain significant value but that may need a substantial amount of work.

•  R – Rehab that property to gain equity and make it appealing to renters.

•  R – Rent the property to provide an income source.

•  R – Refinance the property with a cash-out refinance to provide money for your next investment property.

•  R – Repeat the process with another property that needs help and keep building your portfolio.

Origin and Evolution of the Strategy

Investors have been following these steps for years in an effort to maximize the profits from their rental properties. But podcaster and blogger Brandon Turner of BiggerPockets.com gets credit for the catchy BRRRR acronym, which is now a common term in the real estate lexicon.

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Breaking Down the BRRRR Method

Each step in the BRRRR process presents its own challenges, which may become easier as you develop your own systems and go-to sources. Here’s a look at what to expect.

Buy

Finding the right property to purchase is critical to making the whole strategy work. Many experienced BRRRR investors recommend buying a distressed property that’s in need of renovations, so you can get in cheap and secure the biggest return on your investment. If you have the wherewithal to manage this type of project without getting in over your head, you may be able to quickly add to your equity. And if the property is in a sought-after area, you may find you can charge more for rent.

Rehab

A distressed property may be a good buy, but major repair costs can cut into your profit. And unless you plan to do the work yourself, you’ll need a reliable contractor to help you renovate. Budgeting is a big factor at this stage. It can help to know the market, so you don’t over- or under-improve the property. And since you may be the person who gets the calls when things need to be repaired or replaced, you’ll want to make sure everything is solid and safe.

Rent

Finding the right renter can be difficult — so you may want to hire a trusted property management service to take on this step of the BRRRR strategy. You’ll likely want to check on each applicant’s employment, review their credit score, and perhaps do a criminal background check. Having a reliable renter can cut your overall costs (the place won’t sit empty, you’ll get paid, and you won’t have to worry about damages). And you may need to have a signed lease when you go to do your cash-out refinance. It’s also critical to factor in all your costs and current rent prices for comparable homes in the area when deciding how much to charge.

Refinance

Once you begin collecting rent, you can use it to pay off some of your current costs and prepare for your next purchase. Then, as soon as you have enough equity in the property, you can start the ball rolling on your cash-out refinance. The goal here is to swap your original mortgage for a new loan, preferably with better terms, and to come away with a portion of your equity in cash to put toward your next project. Lenders may have different rules regarding how long you have to own the property, or how much equity you must have to qualify, so it can be helpful to build a relationship with a reliable lender who becomes your go-to source for this step.

Repeat

With the cash from your refinance in hand, it’ll be time to start another property search — or, better yet, to move on a property you’ve already found. If the strategy works, an investor could potentially purchase multiple rental properties and continue making money through rent and equity.

Benefits of the BRRRR Method

As with any investment, there are benefits and risks associated with the BRRRR method. Some of the pros include:

•  You can build equity. If you buy multiple properties, renovate them, hold on to them, and maintain them so they keep their value, you can expect to keep building equity.

•  You can generate a reliable flow of cash. If you buy multiple properties, renovate them, hold on to them, and maintain them so they keep their value, you can expect to keep building equity.

•  You can diversify your investment portfolio Adding real estate investments that provide passive income can further diversify your portfolio, which can help protect you during market fluctuations.

•  You can take advantage of certain tax breaks. As a property owner who earns rental income, you may be able to deduct some of your expenses (mortgage interest, property taxes, repair and management costs, etc.) on your tax return each year.

Challenges and Risks

Some of the drawbacks to the BRRRR strategy can include:

•  You may experience market fluctuations. Although property values and rent prices always seem to be going up, there’s the chance they could slip and (at least temporarily) affect your profit. And if you can’t make your payments, you could lose the property.

•  You may run into renovation overruns. If you’ve ever watched a home renovation show, you know how easy it can be to go over budget. Solid planning, a thorough home inspection, and a contingency fund are must-haves for the rehab stage of this strategy.

•  You may lose rental income if there’s vacancy. Finding reliable tenants can be challenging — and unreliable tenants can mean lost income and/or added costs.

•  You may have trouble refinancing. Depending on the market, lender criteria, and your own creditworthiness, it may be harder than you expected to get a loan, or to get the terms you hoped for when buying or refinancing.

Financial Considerations

Before jumping on the BRRRR bandwagon, there are several financial considerations to keep in mind, including:

Initial Capital Requirements

Unless you’ve saved up a pile of cash to buy your first property, you’ll need to find financing. That could mean:

•  Taking out a mortgage — which can require coming up with a down payment and closing costs.

•  Borrowing against the equity in your own home — which can put your home at risk of foreclosure if your BRRRR business isn’t profitable.

•  Taking out a hard money loan — which is common for this type of real estate investing, but typically comes with high interest rates and short repayment terms — can be risky. Hard money loans are generally offered by individual investors and investment firms that can provide fast funding and usually care more about the value of the asset than the borrower’s creditworthiness.

Rehab Costs

When looking at investment properties — particularly distressed properties — it’s important to calculate the estimated value of the home after renovations and repairs. This is known as the after-repair value (ARV = current property value + value added from renovations). For the BRRRR method, it can be useful to consider how improvements will affect the value of the home for equity and rental income. A common BRRRR rule of thumb is that you should avoid paying more than 70% of the ARV when purchasing the property. So, for example, if a home’s ARV is $400,000, you wouldn’t pay more than $280,000 for the home.

It can also be helpful to carefully prioritize the renovations you plan to make. Making the home safe is critical, but your costs will also include improvements that add value, such as updating appliances, installing new windows, and adding curb appeal.

Cash-Out Refinancing

Cash-out refinancing is a critical part of the BRRRR strategy, since you’ll use the money to buy another property to rehab and rent. You may want to spend a little time researching and comparing lenders to get the best interest rate and other loan terms for your needs and goals. Be prepared: Qualifying for a cash-out refinance and the mortgage refinancing costs (loan fees and other closing costs) can be similar to a home purchase.

Return on Investment Calculations

Calculating return on investment (ROI) can help you make smarter decisions about the properties you own and those you hope to add to your real estate portfolio. Some things to consider when estimating your ROI include:

•  Purchase price and financing terms. If you pay too much for a property or the loan, your returns are likely to disappoint. Negotiating a good deal is a key to making the BRRRR strategy work.

•  Profitable and reliable rental income. Finding the sweet spot between charging competitive rental prices and keeping vacancies low is also essential.

•  Operating expenses. Keeping your property running smoothly can lower your operating costs in the long term. But things like maintenance costs, property management fees, insurance premiums, and the property taxes included in mortgage payments can all directly impact ROI. Again, finding the right balance between efficiency (getting things done) and economy (keeping things affordable) can help you maximize your profit.

•  Property appreciation. Speaking of the long term, a property’s potential to increase in value can also be an important factor when determining ROI.

•  Tax advantages. Investors can reduce their taxable income each year by claiming depreciation, mortgage interest deductions, and other tax benefits related to their rental properties.

Recommended: Mortgage Calculator with Taxes

BRRRR vs Traditional Real Estate Investing

Risk vs. reward is a common theme in all types of investing — and it’s definitely something to look at when comparing the BRRRR method to traditional real estate investing.

While investors using the BRRRR method have the potential to expand their portfolio — and grow their wealth — at a faster clip than traditional real estate investors, they’re also taking on more risk. Which is why choosing between the two approaches can boil down to knowing yourself: How much time and effort do you want to put in? How much do you really know about real estate, renovating, rentals, and the market where you would purchase the home? What is your tolerance for risk (emotionally and financially)?

If you’re relatively new to real estate investing, you may want to seek out some advice from someone who’s a BRRRR veteran. It may make sense to hone your skills and get to know your market better before diving in. Or you may decide that taking a more hands-off approach with REIT investing (investing in a real estate investment trust) is a better fit for you.

Recommended: Real Estate vs. Stocks: Pros and Cons

Tips for Successful BRRRR Implementation

Think you may be ready to tackle the BRRRR method? Here are some planning tips:

•  Use your contacts. If you’ve been investing in real estate for a while, it’s likely you have a go-to group of pros you work with on a regular basis. Tap those folks — real estate professionals, contractors, workers — for advice and assistance as you search for a property to purchase and rehab.

•  Stick to a budget. The key to BRRRR is to keep costs manageable all through the process. That means figuring out your costs before you buy, and sticking to a budget as you renovate, rent, and maintain the property.

•  Be picky about tenants. Choosing good tenants can help you avoid problems with vacancies, missed rent payments, maintenance problems, and other issues. Paying a professional service to vet potential renters could end up saving you money later on.

•  Don’t forget the importance of refinancing. Finding the right lender and home mortgage loan terms as you prepare for your cash-out refinance can help you confidently move on to the next property.

•  Learn from your wins and losses. When you hit the “repeat” stage of the BRRRR method, you can use what you learned along the way to keep improving your process and the team of people you work with.

The Takeaway

The BRRRR method of real estate investing can be profitable: Investors who make it work can enjoy passive income from their rentals and build equity in a portfolio of properties. But BRRRR also can be time-consuming and risky. Newer investors may want to wait until they have more experience with traditional real estate investing before they jump into this strategy.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

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FAQ

How long does a typical BRRRR cycle take?

A BRRRR cycle can vary based on several factors (property selection and closing, renovation schedule, cash-out refinance timeline), but it generally takes a few months to a year.

What types of properties work best for the BRRRR method?

BRRRR investors typically look for distressed properties that can be purchased for a low price. This allows them to add value faster, and to turn their equity into cash to use for their next purchase.

How does BRRRR affect taxes and depreciation?

BRRRR investors can reduce their taxable income over the long term by claiming mortgage interest deductions as well as deductions for property taxes, operating expenses, repairs and depreciation on their rental properties.

Can BRRRR be used in any real estate market?

Yes, the BRRRR method can be used in any real estate market. But it requires finding the right property at the right price, as well as having a manageable rehab budget and reasonable financing and refinancing terms to make it a success.

Photo credit: iStock/Rockaa

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*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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08
2024

Venmo vs PayPal

By | money, Money & Life | Comments Off on Venmo vs PayPal

Payment apps can make sending money to others, buying things online, or splitting the cost of a meal out with friends quicker and easier. There’s no need to enter your credit card details or deal with the hassles that cash and checks can present. That said, you may wonder about the difference between two popular options, Venmo vs. PayPal, and which one better suits your needs at a given moment.

Perhaps surprisingly, Venmo is owned by PayPal, so these apps share many convenient features. Learn how they differ and which one may be right for your financial needs.

Key Points

•   Venmo enables peer-to-peer transactions within the U.S. and features social elements to share transaction details.

•   PayPal supports both personal and business transactions globally, available to both U.S. and international users.

•   PayPal also offers certain social features, such as a “Sell on Social” option that allows users to share items for sale with their social network.

•   Both Venmo and PayPal impose fees on credit card transactions and instant bank transfers.

•   Security measures include encryption and fraud protection, among others, though users should remain vigilant against phishing scams.

Key Features Comparison

Here are a few of the key features of Venmo and PayPal, and how they compare to each other:

Venmo

 PayPal
Transactions must be initiated through the mobile app Transactions can be initiated through the mobile app or PayPal’s website
Primarily used for peer-to-peer payments, though can be used for business as well Can be used either for peer-to-peer or business transactions
Can both send and request money Can both send and request money
No fee to pay with a savings or checking account or debit card; currently a 3% fee for using a credit card No fee to pay with a bank account; currently 2.99% plus a fixed fee to use either debit and credit cards
Spending limit of $7,000 a week and sending limit of $60,000 a week for verified accounts No limit on spending or sending, though potentially up to $60,000 per single transaction for verified accounts
Domestic transactions only Domestic and international transactions

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 4.00% APY on savings balances.

Up to 2-day-early paycheck.

Up to $2M of additional
FDIC insurance.


Fee Structures

Both PayPal and Venmo charge fees for sending and receiving money in many different situations.

•   Personal transfers with both Venmo and PayPal are free, though there are some limitations to the amount and frequency you can send money to or from friends for free (see general guidelines above). These limits can vary depending on whether your account has been identity-verified or not.

◦   If you are transferring money from the app to your bank account/debit card, both payment services will do that for free within a few days. If you want to have that transaction completed instantly, comparing Venmo vs. PayPal fees again find they are equal (at the time of publication). Each charges 1.75% of the transaction amount, with a minimum of $0.25 and maximum of $25. PayPal may add currency conversions for international transactions.

◦   Note that there may be limits on how much you can transfer in this way in a single transaction or specific time period.

•   Business transactions may also come with a fee for the business that is accepting payments as well as for consumers (as noted above) who pay with a credit card. Venmo doesn’t charge a fee when you pay with a debit card, but PayPal typically does.

•   International transactions are not currently supported by Venmo. If you use PayPal to send payments to someone in another country, there is an international fee of 5% of the transaction, in addition to possible currency conversion and other fees.

Costs to Be Aware of

While both PayPal and Venmo are upfront about their fee structures, there are still a few costs that may seem unexpected if you are new to these platforms. A couple of common fees to note:

•   Both platforms will charge you if you send money using a credit card. You can avoid this fee by sending money from a checking or savings account or your existing balance. (As mentioned previously, PayPal often charges a fee if you use your debit card as well.)

•   Another cost to watch out for is that both PayPal and Venmo charge a 1.75% fee for instant transfers from your account in the app to your bank. To avoid this fee, select a normal bank transfer, which generally takes a few days to process.

Recommended: 10 Personal Finance Basics

Security and Fraud Protection

Both PayPal and Venmo work to protect their users. A few points to consider:

•   Encryption: Both PayPal and Venmo use encryption to protect their users’ data. It’s important, however, to understand that there are many phishing scams where criminals pretend to be reaching out on behalf of either Venmo or PayPal. Be vigilant about any communication you receive that says they are from either PayPal or Venmo, and check the payment app itself to see if you are being contacted by the providers.

•   Fraud protection: Venmo and PayPal both offer purchase protection for certain transactions which can help prevent fraud when you shop. You may be able to get refunded in the event that a purchase does not arrive or is not as described.

•   Dispute resolution: PayPal has a Resolution Center where you can flag any transaction you don’t recognize and otherwise dispute charges. Venmo allows users to open a dispute about a transaction within the app.

Recommended: APY Calculator

Social Features

Like many payment apps, PayPal and Venmo encourage interaction with friends, family, and others in your social network. PayPal has a “Sell on Social” feature that allows people to easily share items for sale with their social networks.

Venmo is widely seen as having robust social features. (Using emojis is popular on the platform, for instance.) Depending on your privacy settings, you may be able to see the purchases and other transactions of your friends on Venmo. Make sure that you adjust your privacy settings to reflect what you feel comfortable sharing.

International Capabilities

When it comes to PayPal vs. Venmo and international capabilities, there are major differences.

•   Supported countries: Currently, Venmo is only supported in the U.S. If you have moved outside the U.S. and need to access any funds you have in your Venmo account, you’ll need to contact Venmo support. PayPal, on the other hand, is supported in more than 200 countries and regions. In this way, in a Venmo vs. PayPal comparison, PayPal would be the better option if you want to conduct international transactions.

•   Currency conversion: PayPal typically charges the retail rate of exchange, plus a currency conversion fee of 4.5% of the transaction.

•   Cross-border fees: If you send or receive payments internationally with PayPal, you will likely pay a cross-border fee. This will vary depending on the location involved, but is typically a percentage of the total transaction.

Recommended: How to Wire Money in 5 Steps

The Takeaway

Venmo and PayPal are two of the largest companies that help people send and receive money, both for purchases as well as between friends and family. There are some significant differences between PayPal and Venmo (such as Venmo only being supported in the U.S.). While there are ways to use these apps to send money for free, charges with certain types of transactions — such as those where you use a debit card — and fees may vary. Educating yourself about PayPal vs. Venmo can help you decide when to use which payment apps.

Another way to send funds is using tools that your bank account offers.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.


Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.00% APY on SoFi Checking and Savings.

FAQ

Can businesses use both Venmo and PayPal?

Businesses can use Venmo and PayPal to receive or send money online. A business needs to set up either a Venmo Business or PayPal for Business account, which may come with additional processing fees. You’ll also want to make sure that you are aware of the different refund policies before accepting Venmo or PayPal for business transactions.

Are there transaction limits on Venmo and PayPal?

Yes, both Venmo and PayPal have transaction limits in place. Venmo has a weekly spending limit of $299.99 if you have not verified your account. If you have verified, you can send up to $60,000 per week and also spend a combined $7,000 a week on purchases with Venmo. If you have a verified PayPal account, there is generally no limit to the total amount of money that you can send, however PayPal may limit the amount that you can send in one transaction. Without verification, you can make a one-time payment of up to $4,000.

How do refunds work on each platform?

With PayPal, you can request a refund, which will be returned to your original payment form (say, credit card or bank account). Keep in mind with PayPal is that if you send money via “Friends & Family” instead of as “Goods & Services,” your transaction is not covered by PayPal’s Purchase Protection, so you may not be able to get a refund if the seller chooses not to issue one. Refunds on Venmo work similarly: The Purchase Protection program covers certain transactions. You must contact the vendor you sent money to, who can refund you via your original form of payment.

Photo credit: iStock/MStudioImages

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SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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Nov
08
2024

What Are Capital Gains Taxes on Rental Properties?

By | Home Ownership, mortgage | Comments Off on What Are Capital Gains Taxes on Rental Properties?

If you own one or more rental properties and you’re considering selling this year, it’s important to think about the impact capital gains tax on rental property could have on your profit — and on your future goals for that money.

Planning ahead is key to minimizing the hit to your bottom line. So read on for some capital gains tax basics and a few strategies that can help rental property owners lower the tax burden when they decide to sell.

Capital Gains in Real Estate

When you invest in real estate, the expectation (or hope, at least) is usually that when you sell it, you’ll make a nice profit on the deal. It’s one reason so many people have been investing in single-family rental homes in recent years.

You may already have a plan for how you’ll use that profit — to make another investment, for example, or to put toward your retirement. But if the value of the property has increased substantially during the time you’ve owned it, you should also be prepared to hand over some of your gains to the IRS to cover the capital gains tax.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

Questions? Call (844)-763-4466.

What Is a Capital Gain?

When you determine how much a house is worth, find a buyer, and sell a capital asset for more than you paid for it, the increase in value is referred to as a capital gain.

Capital gains taxes are the taxes you pay on the profit you made because of that increase in value. The tax isn’t applied while you own the asset — in this case a rental property. It hits only when you profit from the sale.

Short-Term vs. Long-Term Capital Gains

The length of time you owned the property before selling it determines whether your profit is a short-term or long-term capital gain. This distinction can make a significant difference in how, and how much, your gains are taxed.

•  Short-term capital gains: If you sell the property after owning it for a year or less, the profit is considered a short-term capital gain, and you’ll be taxed at your ordinary income tax rate for the year you made the sale. Tax rates are always subject to change, but the maximum you could pay for short-term capital gains on a rental property in 2024 is 37%.

•  Long-term capital gains: If you sell after holding the property for more than a year, the profit is considered a long-term capital gain, which makes it subject to preferential capital gains tax rates. Long-term capital gains tax rates are set at 0%, 15%, and 20%, based on your filing status and income.

How Capital Gains Tax Works on Rental Properties

If you’ve ever sold a home, you’re probably familiar with the “home sale exclusion” that eligible home sellers can use to avoid or reduce the capital gains tax on the sale of their primary residence.

Unfortunately, this exclusion typically doesn’t apply to a property used as a rental. (Though there may be an exception if you lived in the property during part of the time you owned it and rented it part of the time.)

Factors Affecting the Capital Gains Tax You May Pay

Without the home sale exclusion, the primary factors that will go into deciding how much you ultimately could be taxed on your gains include:

•   How long have you owned the property?

•   How much did you pay for the property?

•   How much did you spend on improvements to the property?

•   How much did you claim in depreciation?

•   How much did you sell the property for?

•   What was your filing status and taxable income in the year you made the sale?

Recommended: What Is a Home Inspection?

Calculating Capital Gains on Rental Property Sales

These steps can help you estimate the gain on the sale of a rental property:

1.    Start by determining your cost basis (or adjusted cost basis if you made major improvements). This is the price you originally paid for the property, plus money you spent on major improvements (such as additions and upgrades), minus the amount you claimed for depreciation over the years and/or casualty and theft losses.

2.   Next, calculate the capital gain. To do this, subtract your adjusted cost basis from the net proceeds of the sale. (Net proceeds is the amount the seller walks away with after all the closing costs are paid and any home loan balance is paid off.)

Strategies to Minimize Capital Gains Tax on Sale of Rental Property

There are several strategies that can help sellers avoid paying capital gains tax on real estate, either by legally deferring or minimizing their gains.

1031 Exchange

A 1031 exchange is an effective but complicated strategy that allows the owner of an investment property to defer paying capital gains taxes if the sale’s proceeds are reinvested into a replacement or “like-kind” property.
The IRS has several rules regarding the type of property that can be used in the exchange, the timeline, and other details, so you may want to consult with a tax professional if this strategy appeals to you.

Tax-Loss Harvesting

With tax-loss harvesting, you can sell long-term positions in your investment portfolio that have produced capital losses, replace them with similar (but not identical) investments, and then use the loss to offset the gains from the sale of your rental property.

If your losses exceed your gains, you can even use the excess to offset up to $3,000 of ordinary income that year, with any remaining losses carried forward to future years. But again, you’ll likely need some professional help to make sure you’re getting the most out of your investments and that you’re following IRS rules.

Installment Payments

If you prefer to spread out your capital gains tax liability over a period of several years, you may want to look at the benefits of receiving installment payments from the buyer instead of a lump sum. With this method, you would pay capital gains tax only on the portion of the gain you receive each year until the property is paid off.

Convert the Rental Property to Your Primary Residence

If you move into the rental property and make it your primary residence before the sale, you may be able to use the home sale exclusion to reduce your capital gains.

Of course there are IRS rules: To qualify, you must own and occupy the property as a principal residence for two of the five years immediately before the sale. But the ownership and occupancy don’t have to be concurrent, so if you’ve lived in the property as your primary residence for at least 24 of the last 60 months, the gains may qualify for the tax exemption.

Reporting Capital Gains on Rental Properties

The IRS has specific rules for reporting the capital gains on a rental property.

You can start by making sure you get a copy of Form 1099-S. Typically, the person who closes the transaction (real estate attorney, lender, real estate broker title company, etc.) is required to file this form in order to report the sale of a business property. Copies go to the seller and the IRS.

You’ll use Form 1099-S along with other records and receipts to report the capital gains from the sale on your tax return. It’s important to have the original closing documents from your purchase, the real estate purchase contract and closing documents from the sale, receipts related to major improvements, records of any depreciation claimed, and any other relevant paperwork related to the property. This way you (or your tax professional) can more accurately complete the appropriate tax forms and schedules when it’s time to file your tax return.

Filling out these forms can be challenging, especially if it’s your first time selling a rental property and dealing with capital gains. You may want to tap a tax attorney or other professional for the job to ensure that you’re fully compliant with IRS rules.

State-Specific Capital Gains Taxes

Depending on where you reside, you also may have to pay taxes on your capital gains to your state. Most states have a capital gains tax rate between 2.9% and 13.3%, although some states (Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, and Wyoming) don’t charge any capital gains tax.

Impact of Capital Gains on Investment Strategy

Smart planning can help investors manage and mitigate the impact of capital gains. Some things to consider include:

•  Timing: If you can put off selling an asset until you’ve held it for at least a year, you can qualify for the lower long-term capital gains tax rate. Delaying also may make sense if you decide to wait until you have investment losses that can offset the profit from the sale of your rental property. Or you could wait for a year when your income is lower so that you’re taxed at a lower rate.

•  Reinvestment opportunities: Reinvesting the profit from your sale into another investment could open up new opportunities to grow your money — and possibly reduce or defer your tax liability (if, for example, you choose to do a 1031 exchange). A financial advisor can help you figure out your next move and what might be a good fit for your goals.

•  Think holistically: How does selling or not selling the rental property fit into your overall investment plan? It might be better to sell for a profit now and pay the taxes than to wait and end up losing money on the sale.

Recommended: Small Business Loans for Rental Property

Common Mistakes to Avoid with Capital Gains Taxes

Ultimately, it’s your responsibility as the seller to make sure your capital gains tax is accurately calculated and paid on time. Getting the amount wrong or failing to pay could result in IRS penalties. Some common mistakes to avoid include:

•  Failing to report capital gains. It’s important to report all capital gains, whether you think you’ll owe taxes on the amount or not.

•  Miscalculating the cost basis. This number is key to determining your gains (or losses) and, therefore, what you’ll owe the IRS.

•  Record keeping errors. Keeping good records can make calculating your capital gains tax easier, and you may need to provide those records and receipts if the IRS asks for documentation.

Working with Tax Professionals

You may have noticed that the word “professional” comes up repeatedly in this guide. That’s because selling a rental property, and the variables that can go into calculating and reporting the gain on your tax return, will be a little different for every seller. There’s no one-size-fits-all process for DIYers to replicate.

And let’s face it, it can be pretty darn difficult to decode the tax code if it isn’t your line of work. If your goal is to legally maximize your tax breaks, it can be helpful to seek out a tax attorney or an experienced tax professional who specializes in real estate issues.

The Takeaway

Understanding how to avoid capital gains on the sale of a rental property, and doing some proactive planning, could make a big difference to your bottom line. And the more money you can keep from the sale, the more you’ll have to put toward your other financial goals — whether they’re personal, for your business, or both.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

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FAQ

What are short-term capital gains?

Short-term capital gains are profits from the sale of an asset held for one year or less. (Long-term gains, as you might imagine, are the profits from an asset held longer than a year.)

Can I avoid paying capital gains tax on the sale of a home?

If the home is your primary residence, the IRS allows you to exclude a portion of the capital gain from its sale (up to $250,000, or $500,000 if married filing jointly).

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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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