Taxes

Bill Gates Says Taxing Capital Gains Is the Best Way to Tap ‘Big Fortunes’

Bill Gates Says Taxing Capital Gains Is the Best Way to Tap ‘Big Fortunes’

Bill Gates is concerned about the high budget deficits being run by the U.S., and said if taxes are ultimately increased to make up the shortfall, then it’s appropriate for wealthy people to pay much higher taxes.

Using An Intentionally Defective Irrevocable Trust (IDIT) To Gift Your Family Business

Using An Intentionally Defective Irrevocable Trust (IDIT) To Gift Your Family Business

If you are considering making a sizable gift to a family member such as a partial interest in the family business, how you structure the transaction can have a meaningful impact on the success of the transfer, minimizing taxes, and the control you have even after making the gift.

Carbon Tax

Carbon Tax

William Nordhaus has been writing for four decades about climate change and the value of using prices to reduce carbon emissions. His research shows that raising prices through, say, a carbon tax, is a far more effective and efficient way to lower carbon emissions than direct government controls on the quantity of emissions through, say, regulatory limits on cars and power plants.

The Tax Treatment Of Bitcoin And Other Cryptocurrencies

The Tax Treatment Of Bitcoin And Other Cryptocurrencies

The IRS classifies all cryptocurrencies as property. Buying Bitcoin is not a taxable event. But using Bitcoin to buy something else is considered a sale of Bitcoin and selling property for more than you purchased it for is a taxable event. If you "sell" some Bitcoin at a profit that you purchased within the last year, you will have to report short term capital gains on your tax return and pay ordinary income tax rates.

Obama’s Anti-Abuse Rules Slashed Tax-Motivated Inversions

Obama’s Anti-Abuse Rules Slashed Tax-Motivated Inversions

An inversion arises when a U.S. corporation either creates a foreign corporation to be its new parent or merges into a smaller existing foreign corporation.  After the inversion, the combined firm can lower its U.S. tax bill by shifting profits abroad, either through inter-corporate transactions or increased operations abroad. 

IRS Offshore Account Amnesty Closing

IRS Offshore Account Amnesty Closing

Offshore accounts and income are still in the IRS crosshairs. […] For ten years, the IRS has run its Offshore Voluntary Disclosure Program (OVDP), a type of tax amnesty. But now, OVDP will formally close on September 28, 2018. 

Tax, Embezzlement Case Tied To Former Congressman Ends In Guilty Verdict

Tax, Embezzlement Case Tied To Former Congressman Ends In Guilty Verdict

Two years after prosecutors filed an indictment charging David T. Shulick, former president of the Bala Cynwyd-based Delaware Valley High School Management Corp., of embezzling funds from the School District of Philadelphia (SDP), the jury had an answer: Guilty. In addition, the jury found Shulick guilty of conspiring with Chaka Fattah, Jr. to embezzle funds from the School District of Philadelphia, as well as bank fraud, making a false statement to PNC Bank, and filing false tax returns with the Internal Revenue Service (IRS).

Harvard, Yale Are Among Colleges Working to Repeal Endowment Tax

From Bloomberg.com

A tax on wealthy college endowments isn’t set to be collected for more than a year, yet schools are working behind the scenes to roll it back.

A group including Yale University is trying to help two members of the U.S. House of Representatives, a Republican and Democrat, get more sponsors for a bill to repeal the tax, Richard Jacob, who oversees federal and state relations at the New Haven, Connecticut school, said in an interview.

Drew Faust, Harvard University’s outgoing president, is scheduled to meet this week with the co-sponsors, Alabama Republican Bradley Byrne and John Delaney, a Democrat from Maryland.

“I will be encouraging elected officials to undo this damaging and unprecedented tax on the charitable sector, and in doing so to support education, financial aid, student success, and medical research,” Faust said in a statement.

Yale and Harvard are some of the 30 private colleges that would pay the tax, which isn’t adjusted for inflation. Byrne believes the original endowment tax provision is bad policy, said Seth Morrow, his spokesman. Legislators are trying to advance the repeal bill either as a stand-alone or attached to another bill, he said.

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Reducing Tax Impact on Investment Portafolios

From Forbes.com

Tax alpha is an aspect of investment portfolio management whereby strategies are utilized to reduce, delay or eliminate taxation. The tactics that are utilized are not “schemes” and are not implemented in an attempt to not pay tax. Tax minimization is not the primary consideration in investment management, but it should be a factor when allocating and making adjustments to a portfolio.

Tax alpha can benefit all portfolios regardless of whether they are owned by trusts, corporations or individuals. The benefits are certainly relative to the size of the taxable assets and can benefit even small portfolios. The greatest impact, however, is likely to benefit those who are faced with the highest marginal ordinary income tax rate and large portfolios. The reason for this is the variance between the long-term capital gains rate and the marginal ordinary income rate when making holding period decisions.

Taxation is one of many costs working against maximizing portfolio returns. Commissions, fees, interest and many other factors seem to be proactively managed while taxation tends to be overlooked. Portfolios are managed throughout the year, tax statements are delivered to the portfolio owner, who forwards them without looking at them, to the CPA who enters the data into software that produces the tax return. In this too-frequent scenario, nobody takes responsibility for minimizing the portfolio’s tax consequences. The effect of taxation on portfolio returns should be the responsibility of the portfolio manager and stated as such in an Investment Policy Statement.

Tax alpha is produced using a number of different strategies: tax loss harvesting, gain resets, asset location, holding period management and security type selection.

Tax loss harvesting is generally executed at the end of the year but can be utilized at any time. If the portfolio has realized gains (securities were sold at some point during the year), securities that will produce a loss are sold in order to offset those gains. This is a simple explanation, but when harvesting losses, investors need to be aware of the difference between short-term and long-term gains rates and how losses are applied to gains. One also needs to be mindful of the IRS’s wash sale rule, which requires the investor to wait no fewer than 31 days to repurchase the same security in order to deduct losses.

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