Track 10 of 25

Tax and structure

Why borrowing is not a disposal, what a sale does to basis, how interest treatment is limited, the change in basis at death, and trust and entity mechanics. Rules described, never applied to anyone: treatment depends on circumstances and belongs with your own adviser.

25 lessons

Mark a lesson complete and it is remembered here.

Why borrowing against an asset is not a disposalCash arrives, the holding does not move, and nothing in the transaction meets the definition of a sale.6 min
What that means across a lifetime of holdingA gain that is never recognised has been deferred, not cancelled, and the deferral has arithmetic of its own.7 min
Cost basis, and what a sale does to itSelling part of a holding uses up part of the number you subtract, and the part that leaves does not come back.6 min
Holding periods, and why the calendar is part of the ruleOne day can move a figure between two categories, and the rule does not ask why the sale happened when it did.7 min
Lot identification, and why the default is not the specific lotShares are fungible to the market and are not fungible to the arithmetic; an ordering rule decides which ones left.7 min
Why an unrealised gain and a realised gain are different objectsOne is a price that can still fall to nothing; the other is a number the market cannot take back.6 min
Why a forced sale and a chosen sale are different eventsThe event is identical; every decision inside it belongs to whoever is solving for cover rather than for anything else.7 min
What a lender's choice of lots does to the outcomeAn ordering convention buried in an account setting can multiply a recognised gain fivefold without any price changing.6 min
Interest treatment, and the limit that comes with itRelief for a cost is capped by a quantity that has no relationship to how much of the cost was paid.7 min
Why the interest must usually meet income of a matching kindAppreciation is not income, so the pool a financing cost can be set against is far smaller than the portfolio suggests.7 min
Tracing: what the borrowed money was used forThe collateral does not characterise the loan. The spending does, and only for as long as the spending can still be followed.6 min
Why the use of proceeds changes the treatment of the costOne account holding two kinds of money creates a third problem: an ordering rule nobody chose decides the answer.6 min
Carrying an unused amount forwardAn amount blocked this year is not banked; it is queued, and it has to pass the same test again on arrival.7 min
Constructive disposal: when a hedge is treated as a saleRemove enough of the risk and some systems stop asking whether the shares ever moved.7 min
Why some hedges reset a holding period and others do notThe clock can be paused or sent back to zero, and neither event shows up anywhere on a trade confirmation.7 min
Offsetting-position rules, at a mechanical levelA loss on one leg is held back by an unrecognised gain on the other, and waits for it.7 min
What a hedge does to the treatment of a dividendSome characterisations are earned by bearing risk for a counted number of days, and protection stops the counting.6 min
A change in basis at death, mechanicallyIn some systems the figure subtracted on a later sale is reset to a value that nobody ever paid.7 min
What that change does to a loan that outlives the borrowerThe debt survives, the collateral is still pledged, and the figure used to repay it may have moved overnight.7 min
Basis, debt and the arithmetic of an estateWhat passes is net of borrowing; what is subtracted on a later sale often is not. Two quantities, one loan apart.6 min
Revocable and irrevocable arrangements, mechanicallyThe label on the document decides nothing. The powers that were kept decide almost everything.7 min
Who owns collateral when a trust pledges itA pledge reaches only what the arrangement holds, until a single guarantee quietly extends it to somebody else.7 min
Where the tax lands when a settlor is treated as the ownerIncome can arise in one set of hands and be reported by another, and the payment shrinks only one of them.7 min
Holding entities, and why the choice changes the lender's analysis tooA wrapper that answers one question about treatment raises a second one about how fast a claim can be enforced.7 min
What none of this tells you about your own returnIdentical inputs run through two assumed characterisations diverge by a quarter of the gain, and neither assumption was yours.8 min

Educational only. Nothing in this track is investment, legal or tax advice, or a recommendation to enter into any transaction. Completion is stored in this browser and nowhere else.