Recent Tax Court decision could wreak ha

Glover v. Comm, a recent tax court decision, presents several issues to Merchant Mariners. Mr. Glover worked for Reinauer Transportation. His tugs pushed oil coastwise as far as Virginia. The tugs wou

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Recent Tax Court decision could wreak havoc on Mariners

State Taxes and Mariners

Suz asked this question So, what about if you live in one state (TN) and work as a merchant mariner in another state (HI), 45 days on/45 days off rotation? Do you pay HI state taxes, or does the payro

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State Taxes and Mariners

Mariner Tax Update January 2011

E-Filing alert! How many times have you read that mariners cannot E-File? How many websites have posted this. Year after year. And then all of a sudden preparers start proclaiming “mariners can

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Mariner Tax Update January 2011

Employee vs. Non-Employee LLC and S-Corp

I’ve been a client of yours for a few years now and I had a general tax question concerning my wife’s job status. She currently works full time for a marketing firm in “Deleted”

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Employee vs. Non-Employee LLC and S-Corp Planning for Mariners and their families

Maritime Tax Preparers and the Alternati

What they don’t want you to know… This video points out the tremendous effect of the AMT on merchant mariners. Seamen taking business deductions and offsets may very well be realizing litt

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Maritime Tax Preparers and the Alternative Minimum Tax

Deductible opportunities in education for mariners

by on August 25, 2010 at 1:50 pm

Pursuing Higher Education Underway

Technology has certainly changed the way we do business! It has also drastically changed learning. I have taught many e-learning classes where I never come in contact with the students. This is daunting to say the least. As an instructor this poses new challenges. “How do I get my point across without being in a classroom?” This is similar to the time tested exercise – “write down instructions on how to tie a shoe lace” I’m standing by the bunny ears approach…
E-Learning has opened up many avenues that were not available to professionals in years past. People don’t have to lose valuable time commuting to a class room. More importantly, people in areas without higher learning institutions can pursue their educational goals. Hopefully it will only be a matter of time before E-Learning becomes an integral part of the maritime community. (more…)

The Growing Popularity of Preferred Stocks

by on August 13, 2010 at 1:54 am

The Growing Popularity of Preferred Stocks

Appeal Tied to Dividend Priority, Low Correlation to Common Stock

Companies that are seeking to raise money usually have two basic options: They can sell equity shares or they can borrow by issuing bonds. However, an increasing number of companies are turning to a less-used option: issuing preferred stock.

Preferred stock is becoming more popular among certain types of companies, especially banks, because it can be less expensive than issuing equity and it helps keep debt off the balance sheet.1

Investors may be attracted to “preferreds” because they are a potential source of dividend income. Preferreds also enjoy a low correlation with common stock returns, and they offer yields that are typically higher than those available from bonds, short-term debt instruments, and common stock.2

The essential difference between preferred stock and common stock is that preferreds convey additional rights to shareholders, although not all of these additional rights translate into guaranteed advantages.

First in Line for Dividends

Preferred stockholders are first in line when the company decides to issue a dividend. Preferred stocks generally offer a fixed dividend, usually a percentage of earnings, which must be paid before any dividends can be paid to common shareholders. Although the company is not generally required to pay a dividend (and may elect not to offer one when its earnings are below a certain level), some preferred shares are designated as cumulative. This means if the company fails to issue an expected dividend, the obligation to preferred shareholders accumulates and must be satisfied before the company can issue future dividends to common shareholders.

Low Volatility vs. Limited Upside

Preferred stocks tend to be less volatile than their common counterparts, but this is a sword that cuts both ways. If a company enjoys an accomplishment that causes the price of its common stock to rise, the preferred shares may not experience the same appreciation. Yet if the price of the stock falls for some reason, preferred shares are not as likely to experience a corresponding loss of value.

The return and principal value of stocks fluctuate with changes in market conditions. Shares, when sold, may be worth more or less than their original cost.

Sometimes Convertible, Usually Callable

Preferred stocks that are convertible can be exchanged for a certain number of common shares according to a conversion ratio set by the issuer. A conversion might make sense if the common shares are worth more than the preferred shares for which they can be exchanged. Of course, after a conversion, the preferred shareholder is no longer entitled to preferred dividends.

Keep in mind that most preferreds are callable at the option of a company. This gives the issuer the right to buy back the shares according to terms outlined in the prospectus. Callability is among the reasons why preferred shares are sensitive to interest rates. When interest rates fall, the issuer may be able to reduce costs by calling its preferred shares and issuing new shares that better reflect market conditions.

When interest rates increase, the value of preferred shares will usually decline as a result. If rates fall, outstanding preferred shares typically become more valuable, but they are also subject to an increased call risk. Preferred stocks have evolved in recent years as the demands of investors have changed. Call to learn more about the role that preferred stocks could play in your portfolio.

via Integrated Financial Partners – The Growing Popularity of Preferred Stocks : Newsletter: The Growing Popularity of Preferred Stocks.

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