trust-preferred security


A security possessing characteristics of both equity and debt issues. A company creates trust-preferred securities by creating a trust and issuing debt to the new entity. Because the interest paid to the trust is tax-deductible, the company may realize significant tax benefits.

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You should try and figure out a way to break down a trust-preferred security so that you can make it work for you.

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They decided to create a trust-preferred security as a tax shield. They would be able to earn interest, but pay less taxes on it.

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Although I was concerned that we were flouting government requirements by issuing a trust-preferred security, my boss assured me that everything we did was above board and the trust we created would be adequately capitalized.

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