Many people become confused when classifying a stock certificate according to property type because the certificate can be touched and seen, but the ownership stake such a certificate represents is not actual money and can't be touched nor seen. There are several criteria for classifying a property, and identifying the characteristics of a stock certificate that fall under each criteria can help you eliminate the confusion.
The Stock Certificate
A stock certificate is a legal document that evidences ownership of a specific number of shares of stock in a corporation. Corporations commonly issue stock certificates to raise capital for business operations and expansion. Shares of stocks are highly liquid and can be bought or sold anytime. Investors buy stocks usually with the intention of earning a profit from the dividends declared by the issuing corporation or by selling the stocks at a higher price.
Tangible or Intangible
A stock certificate is an intangible property. Properties are often classified according to their physical existence. Tangible property refers to something that you can touch, such as your telephone, computer or car. Whatever you can see and feel are basically classified as tangible property. Intangible property is that which has no physical existence and cannot be seen or felt. A stock certificate may be tangible, but it is merely a representation of the property you own. The actual property, which is the share in the ownership of a corporation, is not something you can see, hold or touch.
Real or Personal
Revenue services in charge of collecting taxes on properties typically define real property as anything permanently attached to land, such as a house or building. They define personal property as anything that is not classified as real property, is not permanently attached to land and can be easily moved to another location. Since a stock certificate is not permanently attached to land and is not classified as real property, it is normally classified as personal property.
Stock certificates of one company held by another are commonly listed by accountants and government agencies as either current investments or long-term investments, falling under the assets section of a company's balance sheet. Stock certificates intended to be converted into cash within a year are classified as current investments, while those that are intended to be kept over a year are considered long-term investments.
- Jupiterimages/Photos.com/Getty Images
- Nebraska Property Tax Lien Law
- Tax Rules Regarding Precious Metals in IRA Accounts
- 1031 Exchange Explained
- How to Replace Stock Certificates
- Advantages of Common Stock from the Perspective of Stockholders
- How to Avoid Depreciation Recapture
- Investing Money as a Shareholder
- How to Buy Stocks & Receive a Paper Certificate