Word: illiquidity
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...past age 70 1/2 at the time of death, it automatically gets liquidated, with taxes due. But even if you've named a beneficiary, he or she might need a distribution to pay the $1 million estate tax. Remember, the only non-IRA asset in this case is illiquid real estate. Result: $1.8 million of a $2 million IRA goes to the taxman. A small part of that may ultimately be recovered through various deductions. But poor planning can devastate an estate. No question about...
...flps can hold any asset, including publicly traded shares. Just retain full control of the partnership with sole discretion over when to sell any assets held by the partnership. The irs then discounts the value of the assets in the partnership by up to 40%, as they are illiquid to the general partners. In this way, a married couple could gift, say, $20,000 of partnership stock (staying at the annual tax-free gift limit) with an underlying value of $28,000. Good deal...
There are other pitfalls. In many cases, if the viator lives longer than expected, investors can end up having to pay premiums to maintain the policy. And unlike stocks or bonds, these are highly illiquid investments. That means that in the event of an emergency, there's no quick, easy way to get your money back...
...They're investing in illiquid assets thatmature over many years and for anyone'scompensation to be heavily weighted toward thenear term in that sort of circumstance is absolutelunacy," the source said. "It's a license to stealin the hands of those inclined to do that...
Land is also a notoriously illiquid investment: a seller can wait months, even years, to find a buyer at the price he demands. Meanwhile, interest payments and local taxes on the land continue. Eli Broad of Los Angeles, a major home builder, says that undeveloped land has to appreciate 20% a year to cover carrying costs. On balance, it rarely does...