Review Your Portfolio

GIMME A TAX BREAK

Review Your Portfolio Periodically

Periodically, I recommend to each of my clients that they take a look at their portfolio of investments. Some are over loaded with one or two stocks that they have held for many years. If possible, they need to try to diversify their holdings without getting hit hard with a large capital gains tax which will grow into an alternative minimum tax.

However, most investors in the market will have 10 to 15 stocks or more if they are investing individual equities. In most cases of that nature, some of the stocks will reflect a market value less than cost. They might want to sell off shares in those companies and then take some of the gains in the winning stocks that they are holding.

If they are down $4,000 to $5,000 in one stock, they could take the loss there and then sell off shares of a winning stock to the extent of the $4,000 to $5,000 in gain and have no effective change in their taxable income for the year. This would provide them an opportunity to reinvest the funds into another investment. The ability to offset gains and losses also applies to investments other than stocks and bonds.

Holding property long term can produce a sizeable gain. They need to realize that they can reduce the tax liability on the sale of the property if they have some “cats and dogs” in their portfolio of stocks that they can sell in the same year that they sell the property.

Give the office a call for a free half-hour consultation, if you would like to discuss this tax-planning strategy as it apply to gains or losses.

10/2/2006