Stocks: Tax Planning
Investment tax planning for stocks takes advantage of the tax rules with the goal of achieving the best after-tax return on these investments. Strategies will differ depending on whether you purchase common stock or preferred stock.
What is common stock, and how does it generate earnings?
Common stock is a form of equity that represents a share of ownership in a corporation. The shareholders of a corporation own the business and therefore benefit from its earnings, which can be distributed as dividends. If the business grows in value, shareholders can capitalize on this growth by selling their shares. Of course, shareholders also bear the risk that the business will decrease in value.