Income Deposit Security (IDS)

A financial instrument composed of stock and notes of the issuer that are sold as one security on stock exchanges. These can also be broken into two separate trading instruments and sold separately by the investor after being held for a specific period. Gains on the sale of the instrument are taxed at the capital gains rate if purchased and sold outside of a year. Interest payments however, are taxed as ordinary income. Also known as Income Participating Security (IPS) and Enhanced Income Security (EIS).