AMORTIZATION, (1) the act of satis fying, liquidating or reducing, as a debt, usually by a sinking fund. The term has a wider application and is more commonly used recently in this sense than formerly. It is often applied to securities in figuring their in vestment value. For instance, if a security is bought at a premium or at a discount, a part of the premium is charged off or a part of the discount is credited so as to bring the value of the security to par at maturity. In each case the transfer is made from investment to income or the reverse. Another common ap plication of the term in this sense is to invest ments having a life of limited duration, as mines. Dividends on such investments are treated not only as interest on capital but also as the return of capital itself. As an illustra tion, if securities in a mine are purchased and such securities yield an annual dividend of 12 per cent, 6 per cent may be treated as income and 6 per cent as return of capital. If the 6
per cent treated as return of capital is again invested at 4 per cent interest, a simple mathe matical calculation will determine the number of years required for the return of the invest ment originally made. The term is also often applied to the paying off of a mortgage by in stalments or by a sinking fund.
(2) The sum applied to satisfying, liquidat ing or reducing, as a debt.
(3) The alienation of lands to a corpora tion having perpetual succession; the convey ance of lands in mortmain. Formerly this was applied to ecclesiastical corporations only, but later it was applied to any corporation which by its nature could be perpetual. Alienation of lands to corporations is governed by statute in Great Britain and in some States in th: country.