Assessable Security

Finance a la shmoop what are face amount certificates or FACs....F.A.C.S yeah like

just the facts man alright well they're a little bit like

an IOU or actually a lot like an IOU only face amount certificates are [IOU appears beside a FAC]

usually backed by a specific asset like a home or a rather a condo complex or an

asset of sizable value like a plane or a train or a fleet of cars an issuer says [Shmoop airlines plane in the sky]

something like well I guarantee you I'll pay you a thousand bucks either fully 14

years from now if you pay me five hundred seventy two dollars and twelve

cents today in cash or I may choose to pay you back two hundred bucks of that

thousand in installment payments every few years along the way and that's the

stream of payments how it would look with a less annoying voice yeah well [Stream of payments across 14 year]

it's bit in the vein of how t-bills are sold at auction they sell at a grand

in months later and get auctions for like nine hundred eighty two dollars and

twelve cents or something like that like you buy them at a discount and then

they mature to par and then get your par money back got it so like in

that case you made seventeen dollars and eighty eight cents....

well the big diff T-bills are backed by the US government while face amount [Uncle Sam carrying T-bill]

certificates are backed by uh you know aunt condos or worse well FAC's used to

have all kinds of tax advantages in that you didn't owe tax on them until the

face amount was paid but today the tax system requires that bonds or bond

values get marked to market each year so that if something is bought at a huge [Discount sticker appears over FAC]

discount while the owner of that bond pays the predicted gains taxes on that

bond all along the way yeah real party poopers there those

tax people not nearly as advantageous as being able to wait until the very end

pay the tax man because eventually he cometh.... [Tax man hand reaches out to grab an ant]