DEFINITION of 'Variable Prepaid Forward Contracts'

An agreement to give a predetermined number of shares to a brokerage firm, with the stipulation of officially transferring title at some future date. The original owner receives a high percentage of the value of the shares at the time of transfer and receives a portion of the gains at the official transferring. If there was a loss during this time period, the brokerage absorbs it.

BREAKING DOWN 'Variable Prepaid Forward Contracts'

Variable prepaid forward contracts are often used by investors to lock in their profits and defer their taxes. In return for giving the stock to the brokerage company, the investor usually gets between 75% and 90% of the current value. So the investor receives cash now, but doesn't actually have to account for the income until the official transfer is complete. Some think this should not be allowed because technically a transfer has occurred, and should therefore be recognized for tax and regulatory reasons.

  1. Transfer

    A change in ownership of an asset, or a movement of funds and/or ...
  2. Current Transfers

    A current account transaction in which a resident entity in one ...
  3. Uniform Transfer Tax

    A combination of federal estate taxes and federal gift taxes. ...
  4. Book Transfer

    A book transfer is the transfer of funds from one deposit account ...
  5. Transfer Price

    The price at which divisions of a company transact with each ...
  6. Balance Transfer Fee

    A fee levied by a credit card issuer when a balance is transferred ...
Related Articles
  1. Personal Finance

    Transferring Credit Card Balances To A New Card

    Before you take advantage of that new credit card's 0% interest balance transfer offer, read our step-by-step guide.
  2. Investing

    5 Money Transfer Tips For Foreign Workers

    If you are working in the U.S. as a foreign worker, here are some tips for sending money back home.
  3. Personal Finance

    How Credit Card Balance Transfers Work

    The pros and cons of credit card balance transfers.
  4. Personal Finance

    The Credit Card Balance Transfer Trap

    Before you transfer a balance to a credit card with a lower interest rate, know how it affects new purchases and other fine-print traps that can cost you.
  5. Insurance

    Understanding The Insurance Transfer-For-Value Rule

    If you are banking on your life insurance payout being tax-free, you may be in for a surprise.
  6. Taxes

    4 Ways To Minimize Estate Taxes

    These four strategies will ensure that most of your money goes to your loved ones, and not to the government.
  7. Small Business

    Moneygram Vs. PayPal Vs. Xoom: Who has the Lowest Fees?

    Learn about the different fees associated with leading transfer services PayPal, MoneyGram and Xoom and the types of services that each company provides.
  8. Small Business

    Which Type of Organization Is Best For Your Business?

    Learn the differences between the types of business organizations so you can determine how to best structure your business for tax and liability limitations.
  9. Managing Wealth

    How Do Futures Contracts Work?

    Futures contracts are one of the most important financial innovations in history, but they are often misunderstood. Find out how this contract is used to transfer risk between different parties. ...
  10. Personal Finance

    The Pros And Cons Of Balance Transfers

    Do the math before you assume that transferring your credit card balance to a lower rate card will save money. It could – or it could cost you.
  1. How does transfer pricing help business?

    Explore several ways that transfer pricing helps businesses. Transfer pricing can often help streamline accounting and business ... Read Answer >>
Hot Definitions
  1. Entrepreneur

    An Entrepreneur is an individual who founds and runs a small business and assumes all the risk and reward of the venture. ...
  2. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  3. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
  4. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
  5. Income Statement

    A financial statement that measures a company's financial performance over a specific accounting period. Financial performance ...
  6. Leverage Ratio

    A leverage ratio is any one of several financial measurements that look at how much capital comes in the form of debt, or ...
Trading Center