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by LTD was called a "byte",6 which was the difference between the
interest obtained on client certificates of deposit and the
interest credited to client accounts. The second type of income
earned by LTD was called internally "basis" income. For certain
certificates of deposit purchased in the client’s name, LTD paid
clients a rate of return based upon a 365-day term of maturity
when such certificates actually had a 360-day term of maturity.
LTD retained the difference, which it called "basis" income. The
third type of income earned by LTD was the "spread", which was
either the difference between (1) the interest obtained on
certificates of deposit purchased in LTD’s name and the interest
credited to client accounts for their IFF investments or (2) the
interest obtained on LTD's client clearing account and the
interest credited to client accounts for their MMA investments.
Through the end of 1985, LTD credited its clients on the entire
amount of interest earned on IFF.
During LTD’s taxable year ended June 30, 1985, the date on
which clients were paid interest for investments in certificates
of deposit was the date on which the interest was received by
LTD. With respect to the IFF and MMA, the date of payment of
interest was independent of the date interest was received by LTD
from the banks.
6
The record reveals that the term "byte" was used also to
refer to what we call LTD’s "spread".
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