The Main Difference Between a Futures Contract and a Forward

question 61

True/False

The main difference between a futures contract and a forward contract is that with the former, buyers and sellers realize gains or losses on the settlement date, while the latter requires that gains or losses are realized daily.

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Definitions:

Ordinary Income

Income earned through wages, salaries, commissions, and interest, subject to standard tax rates.

Preferential Treatment

Practices or policies that give favorable tax treatment to certain transactions, investments, or income, often to encourage specific economic activities.

Holding Period

The duration of time an investment is owned or held by an investor, which can affect the tax implications of the investment's gains or losses.

Gift Tax

A federal tax on the transfer of property by gift during the donor's lifetime, intended to prevent tax avoidance through the transfer of wealth.