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Author: ORWAHOO Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 120820  
Subject: Investment/Tax Strategy Date: 5/23/1997 5:12 PM
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I want to thank TMF Taxes and the folks at Motley Fool for this invaluable service.

Now for my question: This is one of those questions that is also related to Investment strategies, but I need to understand the tax angle.

First, background on me: I'm a 29 year-old Foolish investor. I manage my own IRA and a decent-size (for a 29 year-old) non-IRA portfolio. I'm fully invested in stocks and hold for the long term. I'm investment "savvy," but not necessarily tax "savvy." But, like many Fools, my investment knowledge is focused on individual stocks, and not mutual funds or bonds.

My father, in seeing my knowledge about the stock market (he has NO experience in investing), asked me to invest $100,000 for him. He's still a decade away from retirement, and, as a successful attorney, does not have immediate need for the money. Needless to say, he's in the highest tax bracket.

I plan on investing over a period of time (dollar cost averaging). I'll immediately put 20% into BTD stocks and perhaps short 10-20%. Then, every month or two, I'll buy a block of stock worth about $7,000. Over a 12-24 month period, I plan on eventually fully investing him in stocks.

(Tax question alert)

In the meanwhile, he will have a substantial amount of cash on hand. Should we keep this in a broker's money market account? Or, for tax purposes, should he have the cash in a tax-free bond fund, while periodically withdrawing money to invest in stocks? But, by periodically withdrawing from the bond fund, is he "selling shares," and therefore opening himself up to short-term capital gains?

I obviously want to maximize his return, and will likely (hopefully) have some short-term capital gains from successful shorts. I appreciate your thoughts on this.
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