No doubt you’re aware that the estate tax has been repealed, solely for people dying in 2010. It’s less well known that repeal of the estate tax was accompanied by a change in the rules for adjusting the basis of inherited assets. For a description of the rules that apply when you inherit from someone who dies this year, see our new page on basis of property inherited from 2010 decedents.
Archive for the ‘Capital Gains’ Category
Basis Rules for 2010 Decedents
Thursday, August 5th, 2010Stock Loan Treated as Sale
Friday, July 23rd, 2010The 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…)
Medicare Tax on Investments: First Look
Wednesday, June 16th, 2010Taxation 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…)
Gaps in Broker Reporting of Basis
Friday, May 14th, 2010It isn’t here yet, but it’s coming soon. Beginning with the 2011 tax year, those Forms 1099-B you receive from your broker for sales of stock will include not just the amount you received in the sale, as it does currently, but also your cost basis. The added information will be a convenience to those who are inclined to comply with the tax law, and a deterrence to those who are not. Basis reporting won’t be comprehensive, however, and it will be interesting to see how taxpayers respond to the gaps. (more…)
Covered Calls and Tax Straddles
Wednesday, May 5th, 2010When someone owning shares of stock sells an option that would allow someone to buy those shares, the seller of the option is using a covered call strategy. The option is a call because it’s an option to buy, not an option to sell (which would be a put option). And because the person selling the option owns shares that can be used to meet the obligation to deliver stock if the option is exercised, the option is covered. Many people using this strategy believe they don’t have to worry about the complex tax rules that apply to straddles — and many of them are wrong. (more…)
