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Welcome to all things financial risk each
week Jack it's all things you thought

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were hardly understand about your finances
the magic. Easy but most of all your

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interest from insurance to the best way to
save your money and squeeze the most out

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of the dollars you put aside for
your radio and now you have

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a friend in the money business here's
your host Driscoll. Welcome back again

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everyone to another edition of all things
financial you know we're getting near

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year end and there are so many different
components to financial planning some

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are often neglected and one that's neglected
and usually given attention only at

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the wrong worst possible time actually
is taxes and the reason I say that is

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taxes are given attention in our financial
planning at the worst possible time

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which is usually by April when we're
filing our taxes when it's too late to do

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almost everything or anything about it all
we're doing in February March and April

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is filing

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a report of what happened in the past
but what we're doing now on this show

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today is looking in advance wow there's
still time this year before the year end

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closes if there are tax strategies there
we should possibly consider business

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owners do it but individuals don't.
Typically look at their taxes at all

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and just allow whatever's happening to
happen to them instead of taking some

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control and what I mean by that is for
instance have you missed out on all the

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volatility that's going on in the markets
today and most of you watching will say

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no I haven't missed out an effect right
in the thick of it and I'll say it's

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a financial planner wait

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a minute are you missing out on the
opportunities of the volatility and say what

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opportunities I'm losing money when the
markets are going down I just have to sit

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and wait and I as

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a financial planner with strategies say
that's not at all true 1st off there's

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a saying that we in the industry
have and it's never let

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a good crisis go to waste and in your
perspective what that could mean is we have

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high volatility and sometimes loss positions
and what I'm here to share with you

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today because we're not in April and we're
not in March when it's too late to do

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anything about it for this year but we're
actually in November and we're looking at

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opportunities saying are there strategies
that we should consider now that might

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have positive effects and impact on
our tax return that we're filing

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after the end of this year let's let me
give you an example out trying to give you

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a lot of examples today you know we
talk about IRAs that is one of the few

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strategies that extenders after the
end of the year after the year

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closes it is possible to still effect an
impact your tax return from the prior

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year if you make

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a tax deductible contribution to an
IRA. Up til the date you file your

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income taxes in April let's
say you can still get

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a tax deduction as if that contribution was
made in the prior year so that's one of

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the rare strategies that can be made after
the year closes but how about this let's

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say we have stocks and in your portfolio
you have stocks that you've held for long

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periods of time and are way up in value
over what you initially paid and let's say

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you might also have stocks that are
way down let me take the one that's

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way down 1st you have

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a situation you paid $50.00 per share for
your stocks on average and they're worth

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20 dollars now or $10.00 Now the company
is not doing well and whatever you have

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the shares in and you're wondering whether
to sell out or wait for the stock to

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come back one I guess bit
of advice you'd get from

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a stock broker might be hanging in
there I think it will come back but

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a different set of advice
you might get from a C.P.A.

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a Certified public accountant is OK you
might want to hold that for the sake of

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where the markets are and where you are
in the markets and not take your loss but

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let's consider this the C.P.A.

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Might say why don't you sell it in rebuy
and and you say what do you mean sell it

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in rebuy it and then say why don't you
sell it so that we can deduct the loss and

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your tax return and then rebuy it. And
wait for the markets to go back up you're

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saying or I didn't know we could do that
they'll say how much will that save in

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taxes and they do the calculations
and they say it has saved me

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a $500.00 in taxes let's pretend because
if you don't have any other gains on

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capital assets to offset those losses you
can only deduct up to $3000.00 of losses

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capital losses from your ordinary income
or your other income on your tax return in

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any given year so it's up to $3000.00 of
losses you could deduct and then any dish

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no losses that you incurred get carried
forward over there to the next year or the

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next year used up at the rate of $3000.00

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a year until they're exhausted so is call
your broker back and you say hey I want

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to sell this stock and you sell and then
the next day or the same day you buy it

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back and hill at you he or she alleges the
stock broker let you pay and you'll go

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file your taxes in April and your C.P.L.

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Say oh no what did you do then is say I
do you say I DID YOU TOLD ME TO DO I sold

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my stock and I rebought it so we can
induct the last right and the C.P.A.

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Says Did I forget to tell you you
have to wait when you sell for

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a loss to deduct that loss you're not
allowed to rebuy the same security until

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after 30 days pass so you're not allowed
to sell and well why didn't you tell me

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that looks well minor details Well it's
called when you look at that it's called

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the wash sale world where
when you sell you can rebuy

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and wait for the markets to come back up
but to deduct the laws you have to wait

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over 30 days to be able to rebuy that same
security. So it's not horrible but you

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better know the rules so when this
happens it's possible and talk with have

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your C.P.A.

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And your stockbrokers work together
it is possible to replace that

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with a similar security in the same
industry if you meet the I.R.S.

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Tests you can use

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a different security so that if the home
market let's say you're buying natural gas

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or energy or something like that you say
I'm afraid the industry will take off

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again you could buy

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a similar security as long as it's not
identical so tech with your C.P.A.

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And stockbroker call us we do all
of this and we'll work through the

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scenario to make sure that you're not out
of that market for 30 days if you don't

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want to mess out and still capitalize on
taking the loss All right so there's more

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detail to that you're going to give us

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a call have us work through with the if
you have an interest in that area but we

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now in year end we can do an analysis how
big spore the opportunity if that type of

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strategy makes sense here's the next one
that what I just explained is called

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tax loss harvesting now I
want to get into tax gain

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harvesting Let's say we have

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a situation now you have security that you
bought or inherited 20 or 30 years ago

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you've held the star and you paid $10.00
for it let's say or you inherited it

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and it was worth $10.00 at the
time and now it's $100.00

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a share so it's done very well for you and
we the stock broker you might say. Hey

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is it time to sell the stock and then say
no we think it still has more time to go

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so you call the C.P.A.

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And say Should I sell the stock and then
say oh no no no it's capital gains it'll

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impact your taxes too much but I'm

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a certified financial planner here
did say that in merging this skills

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across different disciplines
taxes and investing and

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the financial planning component of
this I merely shares something with you

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if you sell it again and it's a it's a
it's something you've held for longer than

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a year it's a capital asset which is

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a stock typically you are
subjecting yourself to

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a favorable more favorable tax rate

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a capital gains tax rate of around 15
percent maximum capital gains rate unless

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you're in the very high income tax bracket
when it could be 20 percent maximum

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capital gains tax rate
but I'm going to share

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a secret with you almost everyone listening
to this show and watching on T.V.

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Is probably right now in the 15
percent ordinary income tax bracket

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what I mean by that is you are in the
15 percent tax bracket now the rule

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for capital gains is kind of exciting
and it's not much talked about

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if you incur

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a capital gain in your account and saying
don't sell that stock you'll incur up to

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15 percent capital gains I as a
financial planner I'm going to say wait

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a minute look at their tax return look
at your tax return you're married.

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You don't earn more than a rod $75000.00

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a year taxable income which could be
$85.00 or $90000.00 joint combined income

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you're in the 15 percent bracket after
your write off standard deduction or

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itemized deductions and personal exemptions
things like that when your taxable

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income is less than $75000.00 and
you're married and then you sell

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stocks let's say it's $50000.00 or $55000.00
you're well below the limit and you

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sell stocks with an $8000.00
gain Let's pretend that

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$8000.00 is taxable as

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a long term capital gain that's true and
the maximum capital gains tax for that

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typically is 15 percent but folks
if you're currently in the 15

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percent tax bracket the
capital gains tax can

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be 0 That's right if you sell

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a stock and your income tax bracket
is the normal bracket not I

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income tax bracket but

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a normal bracket it's possible your
capital gains tax rate might be 0.

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I know most of you have never heard that
or been told that but that is the normal

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capital gains tax rate until the
amount of capital gains push you into

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a higher rate so doesn't that open up for

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a strategy where at the end of the year if
I teach you this in February it won't do

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any good but if I teach you this in November
you need to call us get us to review

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your overall situation not just your
position in the stock market waiting for

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stocks to come back or waiting there high
and you don't want to sell because you're

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low tax you need to inquire Is it
possible that you could sell out of game

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positions up to certain limits and pay no
tax could you get out of them tax free

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this is the road percent bracket for Gap
it again has not always been here and it's

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not always going to be here so we have

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a window of opportunity that will close
and should we examine your personal

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situation to see if this is applicable
to you that you can reposition the

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holdings in your portfolios without
paying tax normally when you they're not

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taxable until you sell them but is
it possible to sell and rebuy Now

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remember I just said the watch sale rule
you have to wait 30 days no say well this

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stocks on

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a tear and let them means is it's going
up fast and I don't want to be out of the

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market on this particular security for
that 30 days I don't want to wait here's

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another secret though why

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a sale rule only applies to losses
and you've you've got to be saying

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by now why hasn't anyone told us about this
before this type of putting was eat out

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of

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a certified financial planner that's
why the wise sale rule only applies

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to losses. So if you have

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a gain position and you maximize your gain
position what you're doing by selling is

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resetting your cost basis now when you
rebuy and yes you can rebuy an hour later

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so if you want to get that the laws you
cannot if you want to capitalize on again

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and then reestablish your cost
basis at this new $100.00 level

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that means if they ever change the tax
law and they will and makes all capital

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gains taxes will now once again no 0
bracket anymore you've gotten out all

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of your up to the $100.00 value in gain tax
free if it's stret if it works for you

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and then you reestablished your position
that you'll only 0 capital gains on

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everything over $100.00 now because you
got out all of the gains prior to under

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dollars and if you apply the strategy right
and if it works in your situation you

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might be out at number one

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a more favorable capital gains tax rate
of 15 percent or number 2 you may have

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benefited by getting out of the lower
capital gains tax rate of 0 percent why

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because you watch this show that's why and
you took advantage of it every year and

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near year end you learned by watching
this show we should do tax planning

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near year end and this is one of the
strategies now here's another one we look at

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a lot of the holdings that people have and
companies and business owners and all

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types of things and we look at

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a situation where in your
estate planning you might have

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a portfolio with gains in losses but I
want to share something with you. What

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upon all of these gains if you could not
capitalize on these during your lifetime

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without incurring exorbitant taxes
onerous taxes we would call it you'd

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say we're done an analysis and you are
trafficked that if you sell any of these

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gains you're going to pay exorbitant
capital gains tax or worse the Alternative

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Minimum Tax I won't get into that on
this show but let's say we do these

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sophisticated analysis say we cannot apply
these strategies but you're holding

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these securities that ultimately someday
when they're sold will be taxable and it

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will be

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a high rate of tax would say OK I'll share
another secret it's called the step

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up in basis at death so if you
say I'm holding these assets as

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a legacy asset these are for my children
or my grandchildren I we don't need the

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money we're trying to accumulate in this
state that if we ever need to go into

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nursing no maybe we'll use these resources
but if we never do we want them passed

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under the next generation so you'd ask us
as financial planners What are the most

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efficient ways for us to number one
accumulate assets and number 2 distribute

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assets for legacy planning purposes
which are the best forms for us to hold

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assets would it be in an IRA What
it be in Iraq fiery would it be in

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a non qualified account just regular stocks
and bonds etc Should it be annuities

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all those types of questions so we would
look at that we would say guess what Mr or

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Mrs Jones we will share this with
you any accounts that you hold in

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a non qualified account which are regular
stock and bonds accounts let's say not

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held in I.R.

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Rays or any qualified retirement accounts.
Remember if you sell all those stocks

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they're going to be taxable so that's why
we chose in your income tax bracket to

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not sell them at this time at the time
of your death the kids or charities or

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whatever K N inherent those stocks for
example they don't have to sell those

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stocks unlike other assets that
must be sold sometimes at death

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stocks aren't one of them so you have

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a stock portfolio and your kids can
actually inherit the stocks themselves and

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continue ownership of them well
guess what there's what we call

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a step up in cost basis
in the current tax law

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what it means is what EVERY your
stock value was at the date you die

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that is the errors new perceived cost of

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what they actually have into this security
and had established as their cost basis

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is actually the whole value not the $10.00
you paid for that 100 dollars stock if

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you sold it the year or month before
you died you want to tax on the $90.00

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gain if you die and they inherit the
$100.00 stock their cost basis is now

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100 dollars it immediately steps up
the cost basis upon death to what

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the whole value is and guess what
that means folks in plain English

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the person holding

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a stock only pays tax on any gain that
exceeds their cost basis in the security

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year that So now they just
inherited your $100.00 stock

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sell at the next day. And they don't
know any tax you beat the I.R.S.

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Through the step up and gain you
did no tax but you passed on

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a gift to them that now because they inherited
instead of you selling it in advance

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they don't pay tax either
you beat the I.R.S.

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In the tax code by using their
tax code which is called

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a step up in cause basis written right
into the code but you were smart enough to

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know how to apply the rules why you have

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a certified financial planner on staff
that's why how expensive is it to have one I

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don't know how expensive is it they're not
him one I don't know only you can make

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that decision here's one final thought
we're dealing with year and tax planning

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they're up more strategies than these I
can't go over them all all on the T.V.

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Show but in the radio show but here's
a final one let's say you have

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a $100.00 stock that went to
$2.00 boy if you sell it now

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you take a loss but remember I said
you can only deduct up to $3000.00

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a year unless you have other capital gains
to offset it and I won't get into that

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in detail but let's pretend you don't so
you have maybe $100000.00 in losses let's

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pretend you can only
deduct that 3000 dollars

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a year the rest are last carryforwards
would to take seemingly forever and you're

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already $75.00 or 77 years old you may
never make it folks listen if the

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kids inherit the stock they inherit.
This dog in their bases becomes the

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value at the data death remember so in
reverse there basis isn't $100.00 your

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basis that's not our works oh my goodness
what do we do well there is another rule

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that in gifting an asset
you are in essence in

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a lifetime gift you are gifting the asset
and they retain your cost basis so I

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want you to give us

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a call and find out if you have any last
positions or your parents to talk to them

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00:22:45,18 --> 00:22:52,12
about this and say their tax strategies
we may need to maximize the holdings you

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you know we're going to inherit the stock
These are lost positions maybe you should

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give the stock to us in advance so that
we protect the high cost basis and we can

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continue the ducting the losses year after
year after year after year after you die

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and when Herit them because if you don't
and we inherit those we lose all of the

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losses and so did you so we apply
this step up and basis on gains but

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we might apply gifting strategy during
lifetime on losses to pass the tax

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advantages on to our kids so either way
we're working within the tax laws to how

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busy ro out your income taxes where you
otherwise don't bet are and that's our job

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00:23:38,99 --> 00:23:39,10
as

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00:23:39,11 --> 00:23:44,31
a certified financial planner to help you
evaluate all of your strategies not just

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00:23:44,32 --> 00:23:49,04
singular strategies on investing but
rather all of your strategies in

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a comprehensive financial planning. Outlook
and that's what you want to drive to do

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so it's near here and I want to pique your
interest yes you do have more control

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over what happens to you then you think
thanks again for tuning in to another

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edition of all things financial and I'll
be back again next week. Securities in

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investment advisory services officer sage
point Financial a member FINRA S.I.P.C.

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00:24:14,18 --> 00:24:17,83
And registered investment advisor Insurance
Services Officer Driscoll insurance and

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Financial Services Inc which is not
affiliated with safe One Financial Inc.