Accommodation Trading

DEFINITION of 'Accommodation Trading'

A type of trading in which a trader accommodates another by entering into a non-competitive purchase or sale order. An accommodation trade is often executed when two traders are participating in illegal trading.

BREAKING DOWN 'Accommodation Trading'

An accommodation trade could occur when two traders agree to exchange a stock for a price well below the market value, allowing the seller to realize a large capital loss on the shares. For example, suppose that Bill purchased stock in Company XYZ at $55 per share. With tax season coming soon, Bill decides to sell the stock to Joe for $45, even though the shares are currently trading at $60. Bill realizes a capital loss of $10 per share, which he can use to lower the taxes paid on any capital gains on other investments. After the taxes are filed, Joe sells the stock back to Bill at $45. This trade, also known as a wash sale, allows Bill to cheat the tax system, while never actually losing any value on the stock.

RELATED TERMS
  1. Capital Loss

    The loss incurred when a capital asset (investment or real estate) ...
  2. Ghosting

    An illegal practice whereby two or more market makers collectively ...
  3. Tax Selling

    A type of sale whereby an investor sells an asset with a capital ...
  4. Capital Gain

    1. An increase in the value of a capital asset (investment or ...
  5. Wash Sale

    A transaction where an investor sells a losing security to claim ...
  6. Skinny Down Distribution

    Skinny down distribution is corporate practice of slimming down ...
Related Articles
  1. Brokers

    Top Broker Excuses For Poor Investments

    It is not uncommon for investors to lose money through misselling or other forms of mismanagement.
  2. Markets

    What Investors Can Learn From Insider Trading

    Some insider trading is actually legal - and can be extremely telling for investors.
  3. Economics

    Online Investment Scams Tutorial

    To bamboozle someone out of their money is an age-old ruse. Learn about some of the gimmicks modern-day swindlers use and avoid becoming a statistic.
  4. Investing

    The Biggest Stock Scams Of All Time

    Where there is money, there are swindlers. Protect yourself by learning how investors have been betrayed in the past.
  5. Economics

    Defining Illegal Insider Trading

    The better you understand why insider trading can be criminal, the better you'll understand how the market works.
  6. Economics

    3 Ways Tax Haven Governments Make Money

    If the governments of tax haven countries impose little, or no, income taxes, how exactly do these nations generate revenue?
  7. Tax Strategy

    Assets the Ultra-Rich Use to Reduce (or Avoid) Taxes

    Paintings, oil wells and yachts can get great tax write-offs for their wealthy owners. All it takes is some smart gaming of the tax code.
  8. Your Clients

    Panama Papers: What Advisors Need to Know

    Here is how clients may be impacted by some of the issues brought to light by the Panama Papers.
  9. Taxes

    OK, So I'll Be Smarter Next Tax Time

    5 tax resolutions to start on right now for a smoother tax return next April 18. Yes, it's the same date in 2017.
  10. Tax Strategy

    Donald Trump’s Right That the Game Is Rigged – for Him to Make Money by Running

    Here’s how The Donald games election law to spin glitz into cash.
RELATED FAQS
  1. What are common advantages of investing in large cap stocks?

    Learn what large-cap stocks are and how investors can benefit from common advantages of adding large-cap stocks to their ... Read Answer >>
  2. Are credit card rewards considered taxable income by the IRS?

    Learn about when the Internal Revenue Service considers the financial value of gifts received from credit card reward programs ... Read Answer >>
  3. What is the difference between a REIT and a master limited partnership

    While both are prized for their dividends by income investors, there are notable differences between REITs and master limited ... Read Answer >>
  4. Can a spouse who is not named as a beneficiary receive assets from an IRA?

    It depends.Generally speaking, the designation of beneficiary form dictates who receives the assets from the individual retirement ... Read Answer >>
  5. What are the Best Ways to Lower My Taxable Income?

    Paying taxes is an unavoidable obligation each year, but individuals and business owners can take advantage of various strategies ... Read Answer >>
  6. Why Is Panama Considered a Tax Haven?

    Learn about the offshore tax haven of Panama, and discover the legal and tax structures that make Panama a premier Caribbean ... Read Answer >>
Hot Definitions
  1. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  2. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  3. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  4. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  5. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  6. Economies Of Scale

    Economies of scale is the cost advantage that arises with increased output of a product. Economies of scale arise because ...
Trading Center