Archive for the ‘Capital Gains’ Category
Tuesday, May 31st, 2011
There are two sets of rules for taxation of options. One set, which might be called the regular rules, applies to options to buy or sell stock in a company. Different rules apply when options qualify as section 1256 contracts. Section 1256 of the Internal Revenue Code offers unique treatment for these options:
- Capital gain or loss is treated as 60% long-term and 40% short-term without regard to how long you held the option.
- Any positions you hold at the end of the year are marked to market, which means you report gain or loss based on their current value even though you haven’t sold them.
If you use options in your investment strategy, it may be important to know whether options to buy or sell shares in exchange-traded funds, or ETFs, are treated as regular options or section 1256 contracts. The answer: it depends. (more…)
Posted in Capital Gains, Taxation of Investments | No Comments »
Monday, March 14th, 2011
Suppose you sell a business for $10,000,000, claiming your basis is $10,000,000 when it’s actually closer to $1,000,000. You’ll have to pay tax on that $9,000,000 difference (plus interest and penalties) if the IRS catches you before the statute of limitations runs out. How long do they have to catch you? The Supreme Court will probably have to step in and resolve this question, which has divided the Courts of Appeals. (more…)
Posted in Capital Gains, Court Rulings, News, Taxation of Investments | No Comments »
Monday, December 27th, 2010
In a thread discussing broker reporting of basis, Sven offers the following:
Blessed are they who keepeth good records, for they shall prevail against the forces of darkness (their brokers) and evil (the IRS) on the day of final audit.
Posted in Capital Gains, Taxation of Investments | No Comments »
Monday, December 6th, 2010
Here’s a tax-saving strategy for people who hold appreciated bonds (other than municipals) in a taxable account: sell them, and buy them back. What? Pay tax on my profit now instead of later? Yes. Pay now so that you won’t pay more — possibly a lot more — later. In the right situation, this strategy can pay handsome dividends, even when tax rates are not going up. Any additional savings from avoiding a rate increase are gravy. (more…)
Tags: bonds
Posted in Capital Gains, Taxation of Investments | 1 Comment »
Thursday, November 4th, 2010
New tax rules will require brokers to begin reporting basis and holding period in addition to sales proceeds when you sell stocks and other securities. Regulations implementing this requirement make some changes in the underlying rules for capital gains and losses, and these changes take effect as of January 2011, even though you won’t see basis information on the Forms 1099 you receive in this coming tax season. Here’s a look at how the rules for identifying shares of stock or other securities are about to change. (more…)
Tags: share identification
Posted in Capital Gains, Taxation of Investments | No Comments »
Thursday, September 9th, 2010
For people in the higher tax brackets, capital gains rates are likely to be higher in the near future. Many investors may wonder whether they should cash gains before the end of the year. Our analysis reveals that this strategy won’t always produce benefits. Paradoxically, some people end up with better results when paying more tax. (more…)
Tags: feature
Posted in Capital Gains, Tax Strategies, Taxation of Investments | No Comments »
Friday, July 23rd, 2010
The Tax Court has sided with the IRS in a case where they sought to collect over $100 million in taxes from billionaire Philip Anschutz. At issue was a complicated arrangement known as a variable prepaid forward contract, in which Anschutz received cash up front for a sale to occur later. Anschutz loaned the shares that were covered by this contract to the firm providing the up front payment, permitting that firm to sell the shares. The court found that the prepaid contract and the lending arrangement had to be seen as part of a single deal, with the result being that the sale is viewed as taking place at the time of the up front payment rather than later as Anschutz intended. (more…)
Posted in Capital Gains, Court Rulings, News, Taxation of Investments | No Comments »
Wednesday, June 16th, 2010
Taxation of investments will undergo one of its most significant changes ever in 2013, when the Medicare tax is set to begin applying to investment earnings of higher-income individuals. Although this tax is years away, investors and their advisors need to be planning for it now as it will affect strategic decisions they make this year, including Roth conversions and capital gain realizations. Here’s a first look at the new tax. (more…)
Tags: feature
Posted in Annuities & Insurance, Capital Gains, Dividends, Interest Income, Legislation, News, Taxation of Investments | 5 Comments »
