Capital Gains Stocks: Should You Take
Capital Gains Right Now?
The Dynamic Wealth Report
December 3, 2010
by Robert Morris, Editor
The holiday season is always a bitter-sweet time of year for me. The sweet part is getting to celebrate the holidays with my two
wonderful daughters here in Arizona. The bitter part is I’m usually
unable to share the holidays with my parents and extended family.
You see my parents, my 92-year old grandmother, and several close aunts,
uncles, and cousins all live in Michigan. Since I moved to Arizona 17
years ago, I don’t often get to share this special time of year with
them.
Like I said… bitter-sweet.
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This year, however, I decided to try and recapture some of the holiday
magic of my youth. So, I bought a plane ticket and made the 2,000 plus
mile trip to Michigan for Thanksgiving.
And as I knew it would be, the trip was good for my soul.
What’s more, my grandmother… bless her heart… made one of my favorite
desserts… her famous carrot cake. That alone made fighting the airport
crowds worthwhile.
However, the trip was not all fun and games…
Whenever I get together with my dad, we always spend some time talking
about the market. My dad’s extremely bright and has a tremendous amount
of valuable investment experience.
So, I have to tell you I was shocked when he asked me for advice…
He was wondering if he should bother with his annual year-end tax
planning meeting. With Congress still undecided about extending the
Bush-era tax rates, he didn’t think the meeting was necessary.
Now I’m not a tax professional, but I follow the area closely…
especially when it relates to investments. This is what I told him…
It’s more important to meet with your advisors this year than in years
past. Given all the uncertainty, investors need to know what tax code
changes to expect and how those changes could impact their investments. Only informed investors will be able to take action quickly when the new
rules are set.
And, most importantly, the next few weeks could be your last chance to
take advantage of today’s low tax rates.
You see, Congress is going to resolve the raucous debate over extending
the Bush tax rates once and for all in December. If they decide not to
extend them, the top-rate on long-term capital gains will jump by 33% in
2011. (That’s double the projected increase in rates on ordinary
income.)
So, what’s an investor to do in the face of so much uncertainty?
Here’s the key…
Investors should be ready to act quickly before year’s end if the Bush
tax rates aren’t extended.
If tax rates go up for 2011, it may make sense to delay taking losses
until January. That way the losses can be used to offset gains that will
be subject to the higher rate. In other words, the losses are more
valuable when tax rates are higher.
And if Congress does get its act together and extend the Bush tax cuts…
You might consider taking losses this year to offset your gains. Remember, the time value of money makes taking a tax deduction as early
as possible the most valuable option.
If you’re thinking of cancelling your year-end tax planning meeting…
don’t. Your advisors should help get you ready to make quick decisions
once Congress acts. A few minutes now could save you big bucks come tax
time.
• Kindred Healthcare (KND) was
upgraded by Jefferies from Hold to Buy with a $21 price target. The
shares are up over 3% this morning on the news.
• Stifel Nicolaus downgraded Helen of Troy (HELE) from
Neutral to Underperform with a $19 price target. The shares are down
nearly 3% in morning trade.
• Jefferies rolled out coverage on a few medical device companies. They
rate Insulet (PODD), Integra (IART),
and NxStage Medial (NXTM) each a Buy. All three stocks
are moving higher on the news.
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