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Author: jack98 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121219  
Subject: Capital Gains strategy for student? Date: 12/14/1999 2:59 AM
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Hi everyone,

I'm currently in school but will be graduating in 18 months to a very well-paying job. Given that I'm currently in the lowest tax-bracket and have been fortunate enough to do well in the market, is it in my best interest to invest aggressively and cash out/take capital gains in the next year or so, then do the relatively conservative LTBH thing once I start work?
(in order to avoid taking a big tax hit later)

This is the assumption/strategy that I've been working with in the past couple of years. Any big flaws in what I'm doing?

Thanks in advance for your insights!

Jack

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Author: RooCat Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 23064 of 121219
Subject: Re: Capital Gains strategy for student? Date: 12/14/1999 6:22 AM
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I suppose you could. My question is why would you cash out your stocks if you are doing well unless you need the money. Why not let it ride? LTCG tax is a 20% maximum so how big would the hit be later?.

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Author: stormyout Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 23065 of 121219
Subject: Re: Capital Gains strategy for student? Date: 12/14/1999 8:02 AM
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I think the market is going to drop big in the next couple months and I'd like to grab my profits now and buy back in after the price drop.

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Author: jack98 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 23073 of 121219
Subject: Re: Capital Gains strategy for student? Date: 12/14/1999 10:00 AM
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RooCat replied:
<<I suppose you could. My question is why would you cash out your stocks if you are doing well unless you need the money. Why not let it ride? LTCG tax is a 20% maximum so how big would the hit be later?>>

Ah...forgot to mention that most of my gains are either through daytrading (hiss!) or risky small-caps. The LTBH portion of my portfolio is not as big right now. That being said, does my strategy work?

Jack



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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: 23105 of 121219
Subject: Re: Capital Gains strategy for student? Date: 12/14/1999 6:07 PM
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<<<<I suppose you could. My question is why would you cash out your stocks if you are doing well unless you need the money. Why not let it ride? LTCG tax is a 20% maximum so how big would the hit be later?>>

Ah...forgot to mention that most of my gains are either through daytrading (hiss!) or risky small-caps. The LTBH portion of my portfolio is not as big right now. That being said, does my strategy work?>>

Ahhh...yesss...the tax pro's nightmare. After you work out the strategy, the client casually says..."By the way...did I mention that...."

Since your gains are from daytrading, you likely HAVE no long term capital gains. In order to receive long term treatment, you have to hold the shares for more than one year. So any gains that you realize will be short term in nature...and taxed at your ordinary tax rate. That could be as low as 15%, or as high as 39.6%...depending on your other income.

So, that being the case, it would likely be in your best interest to sell enough to "fill up" the 15% bracket, and get those gains out of the way and taxed at the lowest possible rate. Once you gain employment, it's likely that you be in (at least) the 28% bracket. So if you can generate some tax savings this year, it would certainly make sense to do so.

Don't EVER confuse long term gains with short term gains. The misunderstanding could damage your financial health.

TMF Taxes
Roy



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