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Author: RyanD Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121095  
Subject: Capital Gains Date: 1/12/1999 1:36 AM
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Roy, I'm trying to decide on a game plan for 99' and I was wondering if you could help. Here's my situation:

Our income this year, depending on our short term capital gains between my wife and I will be anywhere between $40,000 and $150,000. All of our portfolio consists of one stock that has appreciated to the point where 95% of what we sell will be a long term capital gain.

I really need to diversify our port and I'm thinking of putting a rein on the short term trading this year and keeping our income below $42,000 so I only have to pay a 15% long term capital gain on the stock I sell. I'm looking to sell somewhere between 100k-250K worth.

If I do this, will I pay 15% on any, some, or all I sell?

Ryno


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Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 8299 of 121095
Subject: Re: Capital Gains Date: 1/12/1999 7:01 PM
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[[ Roy, I'm trying to decide on a game plan for 99' and I was wondering if you
could help. Here's my situation:]]

I'll give it my best shot, Ryno...

[[ Our income this year, depending on our short term capital gains between my
wife and I will be anywhere between $40,000 and $150,000. All of our
portfolio consists of one stock that has appreciated to the point where 95% of
what we sell will be a long term capital gain.]]

Sorry Ryno...but we may have gotten off on the wrong foot here. In your first sentence you say that your capital gains will be "short term". Then you go on to tell me that one stock (with a long term gain holding period) consists of 95% of your portfolio. So I'm a little confused. But I'll plod on.

[[I really need to diversify our port and I'm thinking of putting a rein on the short
term trading this year and keeping our income below $42,000 so I only have to
pay a 15% long term capital gain on the stock I sell. I'm looking to sell
somewhere between 100k-250K worth.]]

Won't work, Ryno. If that is what you are trying to do, you might as well keep trading. Once your long term gains get thrown on top of your other income, you'll get pushed well into the 28% bracket, and potentially beyond. Which means that most, if not all, of your long term capital gains will be taxed at the 20% rate, and you'll blow by the 10% capital gain rate before you can blink your eye.

[[ If I do this, will I pay 15% on any, some, or all I sell?]]

Remember that if you are in the 15% bracket, your long term capital gain rate will be only 10%. But since the long term capital income will blow you into the 28% bracket, you can figure that your gain will be taxed at 20%.

Sorry for the bad news, Ryno. I know that it's not what you want to hear. We discuss this issue in much greater detail in The Motley Fool Investment Tax Guide. You might want to check it out.

TMF Taxes
Roy

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Author: RyanD Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 8325 of 121095
Subject: Re: Capital Gains Date: 1/13/1999 12:27 AM
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Thanx for the reply Roy. I wasn't totally clear with my question, I realize now, but you got the gist of it. I'm not working this year so my income will be short term capital gains on stocks I trade.

To save on long term capital gains taxes, it would take too long to justify, so I think I'll just bite the bullet.

Thanx again.

On a personal note, my wife and I were out in Scottsdale in Oct 97'. Stayed a week at the Camelback Resort. First time I'd ever been out West. Beautiful weather you've got out there.

Ryno

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Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 8351 of 121095
Subject: Re: Capital Gains Date: 1/13/1999 7:37 PM
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[[Thanx again.]]

Any time, Ryno...

[[ On a personal note, my wife and I were out in Scottsdale in Oct 97'. Stayed a
week at the Camelback Resort. First time I'd ever been out West. Beautiful
weather you've got out there.]]

The Camelback is a fine, fine resort. You chose wisely. I'm glad that you enjoyed your visit.

Weather report today: Sunny and clear. High today of about 73 degrees. Low tonight of about 40. More of the same expected tomorrow (when I'm going to play some golf).

Sorry to give this report to all of you folks stuck in the deep freeze....

TMF Taxes
Roy

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