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Clarify my doubt

Anusha (Student) (28 Points)

30 July 2008

Hi Friends,

Can someone help me clarifying my doubt

Why shares are converted to stock how will it help the company?

(reference to conversion of equity shares to stock n vice-versa

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4 Replies

SKM Nair (Auditor) (24 Points)
Replied 30 July 2008

Set off stock market losses against other income by converting your holding into a business asset(stock).

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Anusha (Student) (28 Points)
Replied 31 July 2008

Originally posted by :Guest

I refer to Equity stock which is of capital nature ..........not stock (asset)

Why equtiy shares converted to equity stock........... I think u understood my question wrong

(Guest)

Originally posted by :Anusha
"	Hi Friends, Can someone help me clarifying my doubt Why shares are converted to stock how will it help the company? (reference to conversion of equity shares to stock n vice-versa	"

In my view, stock can be sold in fractions also. But in shares it should b sold in numbers. That is the reason now DEMAT a/c are come into pic.

Harshil R Patel (Chartered Accountants) (27 Points)
Replied 11 August 2008

There are various reasons for converting the shares in to stock in trade depends upon the object of the company..

Shares can be converted in to stock in trade if company has a very huge business losses and at the same time company has an investment at other side.. bcoz if company trades in shares through conversion in to stock then it can set off the losses under business head with the profits from share transaction and that way company reduces the tax burden.

If company keeping the shares as investment then depends up on the transactions, frequency of transactions.. it attracts STCG/LTCG.. and have to pay the tax on business income other hand.. LTCG from equity is exempt subject to STT is paid on such transaction and so by converting it into stock it may reduces tha tax burden...