DEFINITION of 'Custom Adjustable Rate Debt Structure - CARDS'

A type of tax shelter product used by high net worth individuals that involves making a large paper multimillion dollar loan to a foreign party. This party is usually a company that is related to the company that is brokering out the tax shelter. After a series of asset related swaps, the individual receives a paper loss that is equivalent to the original value of the loan. This paper loss can then be used to offset real gains that the individual has earned.

BREAKING DOWN 'Custom Adjustable Rate Debt Structure - CARDS'

CARDS were used in 2000-2002, but the IRS has since deemed them to be illegal, arguing that taxpayers should not be allowed to benefit from losses that were not realized.

Providing CARDS and other questionable tax shelter products was so lucrative that some companies based their businesses on providing them. For example, one of these companies allegedly charged $2 million to create a tax shelter for sum as large as $50 million.

RELATED TERMS
  1. Tax Shelter

    A tax shelter is a vehicle used by taxpayers to minimize or decrease ...
  2. Paper Profit (Paper Loss)

    A paper profit (or loss) is an unrealized capital gain (or loss) ...
  3. Short-Term Paper

    Short-term papers are financial instruments that typically have ...
  4. Paper Millionaire

    A paper millionaire is an individual who has achieved a high ...
  5. Accommodation Paper

    A negotiable instrument that provides a third-party promise of ...
  6. Cross-Currency Swap

    An agreement between two parties to exchange interest payments ...
Related Articles
  1. Trading

    Pros And Cons of Paper Trading

    Most market novices should try paper trading for a while, despite key drawbacks.
  2. Trading

    How to Practice Day Trading

    Day traders face intense competition in today's market, which makes practice more important than ever for achieving above-market risk-adjusted returns.
  3. Tech

    Is the ICO Whitepaper Dead?

    As more and more cryptocurrencies enter the market, the template of the white paper-the document touting the benefits of a new product-has changed.
  4. Trading

    An Introduction To Swaps

    Learn how these derivatives work and how companies can benefit from them.
  5. Investing

    Five Paper Companies Licensed To Print Money

    Here's a sector that significantly outperformed the broader market year to date.
  6. Insights

    How Fortune 500 Companies Avoid Paying Income Tax

    President Donald Trump is not alone in not paying taxes.
  7. Insights

    An Introduction to Government Loans

    Government loans further policymakers' efforts to create positive social outcomes by offering timely access to capital for qualified candidates.
  8. Investing

    What's an Interest Rate Swap?

    An interest rate swap is an exchange of future interest receipts. Essentially, one stream of future interest payments is exchanged for another, based on a specified principal amount.
  9. Retirement

    Business Owners: A Guide To Qualified Retirement Plan Loans

    Thinking of adding a loan feature to your company's plan? Here's what you need to know.
Hot Definitions
  1. Leverage

    Leverage results from using borrowed capital as a source of funding when investing to expand the firm's asset base and generate ...
  2. Financial Risk

    Financial risk is the possibility that shareholders will lose money when investing in a company if its cash flow fails to ...
  3. Enterprise Value (EV)

    Enterprise Value (EV) is a measure of a company's total value, often used as a more comprehensive alternative to equity market ...
  4. Relative Strength Index - RSI

    Relative Strength Indicator (RSI) is a technical momentum indicator that compares the magnitude of recent gains to recent ...
  5. Dividend

    A dividend is a distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.
  6. Inventory Turnover

    Inventory turnover is a ratio showing how many times a company has sold and replaces inventory over a period.
Trading Center