What is trading in accommodation?

Accommodation trading is a strategy that includes the cooperation of two or more investors in creating a transaction that includes the sale of assets at the market prices below, with the subsequent purchase of the same assets for the purchase price on the agreed date. This process, sometimes known as a washing sale, allows the investor to realize capital loss, which in turn means a tax deduction. Although this particular approach is legal in some jurisdictions around the world, there are nations that impose regulations that restrict or prohibit this type of activity. In addition, some brokers do not participate in this type of arrangement, they are considered unethical.

In order to understand the way the function of trading in accommodation, consider the case of an investor who must sell an asset with a loss to reduce his total tax burden. This investor finds a buyer who agrees to purchase an asset for the gross price of the current market value Hold on for several months and then sell assetback to the original owner. In order to be considered to be washing, it must be even, which means that the buyer sells the asset back for the same price he paid for him at the beginning of the accommodation store.

both sides benefit from trading in accommodation. The seller is able to ensure the loss of capital and obtain a tax relief that saves a decent amount of money. At the same time, the buyer uses an asset for an agreed time frame and will also receive any dividends or interest payments from the asset that are realized in the period in which it holds this asset. In the best circumstances, both sides are able to complete the final phase of accommodation trading and leave an agreement that has gained the benefits of hoping to achieve it.

There are some potential disadvantages for trading in accommodation. For the buyer, the asset may not work as expected, resulting in less return fromstrategy before expected. Should this reduction of market value reached a certain point before the seller files its tax return, this could also mean that there would be more tax relief if the asset was not sold and effectively defeat the entire purpose for business activities. Since some in the investment community generally frown on trading in accommodation and the potential risk of this activity, it is often good to find other ways to drive a tax burden.