Wall Street Concepts Products

Long Term OID  Close
Long Term Original Issue Discount (OID) Services.

To assist firms with the computation of Original Issue Discount for either information reporting or portfolio accounting, Wall Street Concepts (WSC) offers a transaction based service that computes the accrual of income on specified tax lots.

WSC identifies all the securities issued with OID, collects the fundamental information and computes the OID accrual rates. The services cover all issues (taxable and tax-exempt) that exceed a de minimis test where the original issue discount exceeds .0025 times the stated redemption price times the number of full years from the date of original issue to maturity.

The OID services cover three segments of the fixed income market:

  • Taxable OID Discount Bonds
    All taxable discount securities, including Corporate and Government Bonds, Federal STRIPs, Eurobonds, and Taxable Municipal securities. This group covers all of the securities in Section 1A & 1B of Publication 1212. In addition, we include a significant number of issues (over one third of our database) that are OID reportable but are not part of Publication 1212. Special attention is given to Pay-In-Kind (PIK), Reset/Split rate, Contingent debt, Inflation Protection Bonds, Equity Units and instruments with Unit Factors. Rates for Treasury Bills and short-term Agency issues are also included here.
  • Certificates of Deposit
    This segment covers brokered discount Certificates of Deposit (CDs). Issuers of these instruments are not required to file form 8281 with the IRS and thus, these rates are not included in Publication 1212.
  • Nontaxable Municipal OID Bonds
    This third segment, by far the largest, covers all Municipal obligations with more than a de minimis amount of discount. The Municipal OID, while being nontaxable, can be furnished as a customer service. Investors receiving these annual OID accruals will have the information necessary for annually adjusting cost basis.
AMBIR - All Mortgage Backed Income Reporting  Close
The Structured MBS and Pass Through MBS 1099 Reporting Service

The service encompasses two process modules:

  • Structured MBS Module
  • This process module covers mainly the Real Estate Mortgage Investment Conduits (REMIC) and the Collateralized Debt Obligations (CDO). This service identifies the collateralized debt obligations and REMICs held, and provides your firm with the calculation of the 1099 reportable income, additional written statement and the calculation of secondary market adjustment information, (premium and discount information), for investor level tax reporting. Monthly CUSIP files are provided as a tool for your firm to update your security master, ensure cash payments are classified correctly and as a solicitation of transaction activity that WSC utilizes to perform income calculations. Income calculations are performed once annually in March to meet your March 15th 1099 reporting obligation.

    REMICs are subject to accelerated repayment of principal. Issuers are required to adjust income accruals based on the actual prepayment history relative to the prepayment history projected at the time of issue. For this reason, the tax factors must be collected from issuers and are only available periodically. Certain REMICs (Combinables) are constructed as combinations of other underlying REMICs. WSC maintains a database of these issues and since, data is only available on the underlying classes, unwinds Combinables into their underlying components for processing. WSC also provides daily on-line management reports covering the progress of the data collection process so clients can optimize the decision of when to process their 1099s.

  • Pass Through MBS Module
  • This process module covers the mortgage backed securities that are classified as Widely Held Mortgage Trusts (WHMTs), a subset of Widely Held Fixed Investment Trusts (WHFIT). There are three major WHMTs issuers, Freddie Mac, Fannie Mae, and Ginnie Mae. The service collects the tax factor files from these issuers and applies the information to your firm's transactions and payment activities to create comprehensive schedules of gross income, expense, and other required information indicated under the WHFIT regulation. Because the tax factor files are only available once a year, the security identification file can only be updated and distributed annually. However, the securities can be identified based on certain criteria.

    The output of this module is offered in three versions:

    • Data Files: Data files are returned giving payment by payment detail of income, expense, proceeds, withholding, principal factor, market discount fraction, and income adjustment. Separate records are supplied summarizing the above elements for the tax year.
    • Supplemental Schedule Print Image: For each holding a print image is returned showing the summary and detail. This is to be used as an additional schedule for client reporting.
    • Full Statement Image and IRS Filing: This option returns a complete print image of the statement to be delivered to the investor. Also, a 1099 filing is made with the IRS on behalf of the subscriber.
OID Calculator  Close
Original Issue Discount (OID) Calculator.

The following is an overview of the economics and tax considerations regarding original issue discount. For further reference material you may refer to IRS Publications 1212 List of Original Issue Discount Securities and IRS Publication 550 Investment Income and Expenses. Relevant tax code sections are 1271 through 1275.

It is used to calculate OID income, market discount, acquisition premiums adjusted cost basis and realized gains and losses on fixed income securities. If your portfolio includes REMICs, corporate bonds, federal strips, municipal bonds or certificates of deposit securities, this calculator is what you need. You can also use the OID Calculator to create an original issue discount lifetime accrual schedule for those same securities. Since it is a subscription-based service a user password is required.

Income Reallocation  Close
Income Reallocation Service for Real Estate Investment Trusts (REITS) and Regulated Investment Companies (RICS).

Regulated Investment Companies (RICs) commonly referred to as open and closed end funds and Real Estate Investment Trusts (REITs) are pass through vehicles for tax reporting purposes. As such, the tax character of distributions made by these investments is more likely to change at the conclusion of the year than, for example, an equity that pays dividends from current or retained earnings. Additionally, mutual funds must determine the amount of gross-ups for foreign withholding, tax-exempt payments subject to alternative minimum tax and the portion of the distributions derived from US Treasury obligations. WSC maintains a database of all RICs and REITs and actively solicits the issuers to identify instances income reallocations (post payment changes to the tax character) or to confirm that the income character is unchanged. As part of this process WSC collects foreign tax withholding factors, alternative minimum tax factors and the allocations percentage, by state, of tax-exempt income. WSC also screens equity securities to identify situations where dividend payments are likely to be characterized as a return of capital and contacts the company for a determination of the tax character of the distribution. The information collected is tested and standardized so that it may be utilized and, in its original format, is viewable on the WSC web site.

The Income Reallocation service is offered in three ways: a Data Browser via the World Wide Web, a Database and a Transaction Processing service. Regardless of the service level subscribed to, you identify your holdings at the outset of the process and daily reports are available on WSC's web site that document the progress of collecting the data that is relevant to your firm.

Compliance Plus®  Close
Information Reporting Outsourcing.

The process of tax information reporting is often viewed as a necessary evil for brokerage firms and their system providers. There is a minimum level of service that is required to satisfy the regulatory requirements. Often satisfying this is considered acceptable. It is a common belief that superior tax information reporting does not help win new customers. However, most industry professionals will acknowledge that poor tax information reporting can result in lost customers. The official 1099 document and supplemental tax information is a customer contact document.

Wall Street Concepts believes that superior tax information documents can and will build customer loyalty and create a competitive advantage. There is little room for creativity on the official 1099 document or substitute statement since the content and to a large degree appearance is dictated by regulation. There is however, the ability to include supplemental information that is useful to the taxpayer for the completion of his tax return.

MLP  Close
Master Limited Partnership Service.

In 1987, the Internal Revenue Service made it mandatory for brokerage firms and banks (Nominees) to provide street name information to Master Limited Partnerships (MLPs), so as to enable them to produce K-1 statements for their individual investors. WSC operates a clearinghouse, identifying master limited partnerships, collecting information from Nominees, editing the information, consolidating the information and distributing it to the Master Limited Partnership. The majority of MLPs receive output on a monthly basis.

Monthly CUSIP files are provided as a tool for Nominees to update their security master, ensure cash payments are classified correctly and as a solicitation of transaction activity. Demographic and transaction activity is edit tested and balanced with on-line error reports. Nominee account numbers are masked with a WSC account number as a safeguard to Nominee Customer information. Both Nominees and Partnerships are given web access to view the data should any K-1 questions arise.

UIT  Close
Unit Investment Trust Service.

UIT Transaction Processing is performed quite like transaction processing for bond OID accruals and mutual fund income reallocation. That is, clients receive a solicitation file from WSC that identifies all the taxable UITs known to us. Using that list of publicly-traded trusts, clients extract all transactions for the year that are related to those security identifiers. After receiving the extract file from the client, WSC loads the original UIT transactions received from the client into a database, performs a series of edits on the data, resolves any serious problems with the client, and awaits the arrival of the end-of-year data from the trustee. After year-end accrual and gross up rates arrive, are posted and edited, the year-end UIT adjustments are performed - in batches as the trustee data is posted.

For OID accruals, a preliminary step computes holding periods for trusts with OID data. "Calculation periods" (periods for which the accrual rate and the units held are constant) are defined for the year by OID accrual period end dates or acquisition or disposal transaction dates. Example B, shown below, illustrates this process.

Other support services are provided by WSC to help clients review and manage this activity. First, the loading edit report is made available to help resolve possible problems in the input data. After the data is corrected and approved to be loaded, and after the year-end processes have been run, the client can view original and adjusting transactions for a selected holding (account code + security identifier) using a password-protected display on our web site. For spot checking purposes, there are links to a display of the accrual and gross up factors for the selected trust, and there are daily web based management reports identifying UITs processed and UITs waiting for data with statistics on holders counts for each and summary statistics about the progress of the UIT adjustment process. These services are almost identical to those provided to WSC's Income Reallocation customers and some of the calculations for these taxable trusts are quite similar.

TEFRA Glossary  Close
Tax Information Service for Structured Product Securities.

New inventions of financial engineering have introduced to the market many structured product instruments whose payment events have grown in complexity, requiring additional information, which, in some cases changes from year to year. To assist brokerage firms in capturing all the reporting events correctly, WSC provides various tax related information and consolidated reports via the TEFRA Glossary service. Among the areas covered by the service are:

  • Identification of Fixed Rate Capital Securities and the characterization of their income as partnership distribution, interest, OID or miscellaneous income.
  • Identification of securities requiring payment allocations such as reverse convertible securities and the percentage allocation of payments among interest, option premium, contract fees and other distribution categories.
  • Identification of contingent payment obligations, their payment schedules and differences with actual payments made.
  • Identification of issues with deemed payments and tax credits that must be reported based on record date holdings rather even in the absence of an actual cash transaction.
  • Identification of implicit redemptions of debt bundled in reverse convertible issues.
  • Identification of broad-based option contracts that are subject to Section 1256 reporting.

This includes an on line browser, periodic delivery of database files and coverage expanded to additional asset classes. WSC specializes in the identification, collection, standardization and processing of data to facilitate the production of Forms 1099 and K-1, as well as preparation of individual tax returns.

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