Asset allocation, retirement accounts, and section 304 considerations

Asset Allocation and Industry Sectors:

There are several economic concepts that affect an individual's daily finances and investments such as asset allocation and industry sectors. Asset allocation is primarily described as the manner with which an individual divides his assets among various asset categories like cash, bonds, stocks, and real estate. This fundamental principle also refers to an investment strategy with which an investor can lessen risks through diversification. One of the major goals of asset allocation is that it seeks to balance risk and reward through distributing a portfolio's assets based on a person's goals, investment horizon, and risk tolerance. Notably, the process of determining which combination of assets to retain in a portfolio is usually a very personal one ("Beginner's Guide to Asset Allocation," 2009).

The other common financial term or concept is industry sector where the two words have been used interchangeably to refer to a group of companies. Generally, industry sectors can be described as group of similar businesses and firms that share common characteristics and manufacture related goods and services. As a result, financial analysts and investors use the industry sectors to compare firms against each other ("What are Industry Sectors?" n.d.). This is primarily because financial information of businesses from different sectors is meaningless.

Importance of Retirement Law and Accounts to Asset Management:

Asset management for individuals and families is a process that serves high and very high net worth for individuals or families. This is primarily because it offers information that is helpful for integrated wealth management. Asset management for individuals or families may also involve receiving advice from trustworthy and independent financial advisors in order to examine investment solutions for the individuals or families. Therefore, it's important for individuals and families to critically consider important factors when carry out this process.

One of the most important aspects of asset management for individuals or families is retirement law and retirement accounts. Generally, retirement planning plays a significant role in serving as a source of income in future life. During the process of asset management, individuals and families plan different sources of income for future life through retirement plans. Regardless of the importance of retirement plans, the process of doing so during asset management is difficult to perform. Therefore, retirement law and retirement accounts help in developing suitable retirement plans during asset management. Retirement law enables individuals and families to know how to go about the process, while retirement accounts are used to earmark funds that act as sources of income in future life.

Section 304 and Section 351 Exchange:

Section 304 states that the transfer of stock in one corporation to the other corporation as part of exchanging property is considered as a redemption distribution from the issuing corporation to the acquiring corporation (Holden, 1983, p.53). In order to determine whether the supposed redemption qualifies for capital treatment, the stipulated tests in section 302(b) are applied with regards to the individual majority's stock interest in the issuing corporation. In a scenario where the section 302(b) tests are not met, payments from the acquiring corporation to the individual majority shareholder in the issuing corporation constitutes a 301 distribution.

In a section 304 stock exchange, section 304 takes precedence over the regulations of part III if the transaction would also qualify as a section 351 exchange. This follows the enactment of the Tax Equity and Fiscal Responsibility Act of 1982 with which section 304 overrides section 351. This implies that section 351 continues to apply to the extent that a person with 50% or greater control in a corporation receives the acquiring corporation's stock for the issuing corporation's stock. Therefore, the receipt of any other property by the person with greater control in exchange for the issuing corporation stock is currently tested or examined under section 304 including the securities of the acquiring corporation.

Benefit of Retaining the Property and availing it by License or Lease:

Many property owners prefer retaining their property and making it available to corporations through leasing or licensing. In most cases, these owners hire agents to lease their property on their behalf through obtaining a listing agreement in order to act as a fiduciary in leasing the property. The benefit of retaining the property but making it available to the corporation by lease or license is that the individual gets the value of any appreciation of the property ("How to Decide," 2012). Actually, the major advantage of retaining the property and availing it through license or lease is that the initial value of the property continues to appreciate, especially in the long-term.

In order to retain the property and avail it through lease or license, the owner should hire an agent who acts on his/her fiduciary behalf in licensing or leasing the property. The agent is mandated with the task of advertising the property in order to find a suitable client. The agreement between the owner and agent is primarily performance-based i.e. The agent earns commission after a lease or license is signed. The agent's commission is normally paid 50% upon the execution of lease or license and the other half upon occupancy.