Marked to market at year end for tax purposes

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Marked-to-market at year- end for tax purposes. Background Background Impact Impact 1010271-Cor-10
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0903270-Col-MBA-18-19 12 Tax Treatment for Equity Linked Notes Principal-Protected ELN generally are treated as “Contingent Payment Debt  Instruments” (“CPDIs”) for U.S. federal income tax purposes. Even if a CPDI  does not pay a coupon, an investor generally is treated for U.S. federal income  tax purposes as if it were entitled to coupon payments equal to the CPDI’s  “comparable yield”. This comparable yield is based on the rate at which the  issuer could have issued a plain vanilla bond having certain similar  characteristics, including maturity and subordination, as the Note.  As a result,  a holder  of a CPDI must pay tax on “phantom income” prior to the maturity of  the note.  All income and gain from holding or disposing of a CPDI generally is  taxed as ordinary income The cost basis of the note is increased yearly by the amount of “phantom  income” treated as taxable income for that year If a CPDI matures at a price greater than the adjusted basis, the investor  pays tax on the excess of maturity price over the adjusted basis If a CPDI matures at a price less than the adjusted basis, the investor has  an ordinary loss equal to the excess of maturity price over the adjusted  basis Often difficult to classify for U.S. federal income tax purposes, although the  most basic varieties often are characterized as prepaid, cash-settled forward  contracts. All income, gain or loss from holding or disposing of a Non Principal- Protected ELN characterized as a forward contract generally is taxed as  capital gain or loss Principal-Protected  Principal-Protected  ELNs ELNs Non-Principal- Non-Principal- Protected ELNs Protected ELNs 1010271-Cor-10
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0903270-Col-MBA-18-19 13 Tax Implications of Specific Strategies Hedging a Single Stock Constructive sale Tax-Efficient Short Selling Stock vs. derivatives tax treatment Tax Loss Harvesting Wash sale rule 1010271-Cor-10
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0903270-Col-MBA-18-19 14 Specific Considerations in Hedging  Single Stock All of the hedging transactions below are ineffective because  they result in the recognition of a capital gain 1. Short sales of the same or substantially identical property 2. An offsetting equity swap with respect to the same or  substantially identical property 3. A futures or forward contract to deliver the same or  substantially identical property 4. In the case of an appreciated financial position that is itself  a short sale, entering into an offsetting equity swap, or a  futures or forward contract, with respect to the same of  similar property; and 5. any transaction that has substantially the same effect as 
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