Business and Personal Finance Dictionary

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• PUT OPTION
  
  The right, but not not the obligation, to sell the underlying asset at the strike price. Cf. Call Option. One variation on the MIPS structure involves an offshore Sub, which pays dividends to investors without withholding tax. Part of the motivation for MIPS seems to be reduction of taxes paid by the issuer and its direct or indirect security holders. Parent issues debt and pays interest, so Parent may deduct interest expense. Subsidiary issues preferred shares and pays dividends, so corporations that buy MIPS get a dividend exclusion. This shifts the tax burden to parties besides security holders of Parent and Sub. Texaco, Inc., USX Corp., ConAgra Inc., and others issued more than $2.5 billion in the first year MIPS existed. Merrill Lynch and Smith Barney have issued similar securities. The masochistic or meticulous among you may like to view legal documents from Edgar, pertaining to a proposed offering of MIPS, by Capital Holding Corp., with help from Goldman, Sachs. See also U.K. Mips.
  
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