Taking $1M+ Long Term Capital Gains

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viewer0
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Re: Taking $1M+ Long Term Capital Gains

Post by viewer0 » Thu Jun 14, 2018 6:55 pm

Now I understand a bit more. If my income ( married filing joint) is more than $600K, then I fall under 37% tax bracket. Let's assume that I earn $601K, then I fall under 20% long term capital gains tax. So would all my capital gains be taxed at 20%? This does not make sense as it is better to earn less than $600K

bradpevans
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Re: Taking $1M+ Long Term Capital Gains

Post by bradpevans » Thu Jun 14, 2018 8:21 pm

viewer0 wrote:
Thu Jun 14, 2018 6:55 pm
Now I understand a bit more. If my income ( married filing joint) is more than $600K, then I fall under 37% tax bracket. Let's assume that I earn $601K, then I fall under 20% long term capital gains tax. So would all my capital gains be taxed at 20%? This does not make sense as it is better to earn less than $600K
See here: https://www.google.com/amp/s/www.fool.c ... -2018.aspx

Not sure where you got the 600k figure

Wages + gains determines the LTCG Rate

First income is taxed according to those income rates. Then gains are stacked on top but taxed according to thf LTCG rates.

Google taxcaster

See also: https://sites.google.com/site/excel1040/

viewer0
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Re: Taking $1M+ Long Term Capital Gains

Post by viewer0 » Thu Jun 14, 2018 8:36 pm

Not sure where you got the 600k figure
Here :
https://www.kitces.com/blog/final-gop-t ... trategies/
This says that for Married Filling Jointly, it is 600K.

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Artsdoctor
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Re: Taking $1M+ Long Term Capital Gains

Post by Artsdoctor » Thu Jun 14, 2018 9:55 pm

Viewer,

When you say you're confused, it's because you don't understand tax law. Nor should you. Have you even done a rough estimate with a tax software program? Do you even know if you'll be in the AMT with this large AGI? You're worried about when the "20% capital gains" rate kicks in with a $2M gain? Please take a step back, realize the limitations of the forum, appreciate the fact you're talking about a lot of money, and consult a professional. If you're going to liquidate that much, you really don't want a DIY approach. The 2018 tax law is still a work in progress and there's just no possible way for you to make an informed decision based on an internet forum, other than very established and well-regarded forum members suggesting that you consult a professional (and I'm not talking about myself).

viewer0
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Re: Taking $1M+ Long Term Capital Gains

Post by viewer0 » Fri Jun 15, 2018 6:38 am

Artsdoctor

Appreciate your candid comments.

I would not unwind $2M gains this year. What I was trying to understand when I would hit the 20% LTGC. This should be a straight forward question, I thought.

Yes, I have paid AMT in the last 10+ years.

Since my case is straight forward with just salaried income + investment income from stocks , as some members said, there is no hidden tricks that is beyond the scope of this forum.

cherijoh
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Re: Taking $1M+ Long Term Capital Gains

Post by cherijoh » Fri Jun 15, 2018 7:08 am

viewer0 wrote:
Tue Jun 12, 2018 7:51 pm
I have accumulated over $2M LT CG. What is the best strategy to take the gains ? I am thinking 2018 will be the last bull year and I would like to unwind soon. What is the optimum LT CG that I should take in a year keeping in mind the tax brackets? The gains are in personally managed individual stocks.

TIA
viewer0 wrote:
Tue Jun 12, 2018 10:05 pm
Thanks all for the advices.
I would be looking to buy some PUTs for the ones that I do not sell.
I am planning to put the money in an S&P index fund just as Mr Buffett suggests.
This gain is about 50% of my portfolio.
Do you really have $2M in long term capital gains? Or do you have a $2M portfolio that you want to sell? Big difference!

viewer0
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Re: Taking $1M+ Long Term Capital Gains

Post by viewer0 » Fri Jun 15, 2018 9:00 am

$2M LTCG in taxable account

Leesbro63
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Re: Taking $1M+ Long Term Capital Gains

Post by Leesbro63 » Fri Jun 15, 2018 10:27 am

I’m curious about the long term prospects for the highly appreciated stock in question. My thinking is that if it’s a speculative stock that did well, pay the tax and diversify out. That may be cheaper than continuing the risk that today’s darling will become tomorrow’s dud. But if it’s a solid company, that’s a lot of tax to pay on something that has good prospects over the longer term.
Last edited by Leesbro63 on Fri Jun 15, 2018 12:14 pm, edited 1 time in total.

arf30
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Re: Taking $1M+ Long Term Capital Gains

Post by arf30 » Fri Jun 15, 2018 10:55 am

If I knew I had captital gains of that size I would plan ahead by making sure myself + spouse were not working that year to be in the lowest tax bracket, and would have relocated to a state with low capital gains/no income tax like FL. You'd probably want to spread it out over multiple years as well.

wrongfunds
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Re: Taking $1M+ Long Term Capital Gains

Post by wrongfunds » Fri Jun 15, 2018 11:44 am

Before it became $2M in capital gains, few years ago, it was $1M in capital gains. Before that it was measly $500K in capital gains.

If you never thought of selling and taking the gains for last few years even when you had 7 figures in capital gains, what is making you to tackle this "big problem" today?

Please ignore this question if you did NOT have the ability to liquidate your holding before today.

HJG0989
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Re: Taking $1M+ Long Term Capital Gains

Post by HJG0989 » Fri Jun 15, 2018 12:22 pm

Hi viewer0,

I'm in a similar situation with a $1million + capital gain in a taxable account. The gains are in individual stocks and I want to move the money into index funds. I would also like to move a rollover IRA into a Roth IRA, but that may not be feasible since I am 61 (I probably need to have everything in place before drawing social security).

I am looking for an enrolled agent. An EA is certified (a two day exam) to represent clients to the IRS. They are specialized in tax issues. Here is a website to find EAs in your area: taxexperts.NAEA.org

There were at least 100 EAs in my area, but only one of them also offered financial planning advice as well. For $1,500 I can hire them to go over my portfolio and make recommendations to work toward my goals.

Good luck with whatever you decide.

Leesbro63
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Re: Taking $1M+ Long Term Capital Gains

Post by Leesbro63 » Fri Jun 15, 2018 12:28 pm

HJG0989 wrote:
Fri Jun 15, 2018 12:22 pm
Hi viewer0,

I'm in a similar situation with a $1million + capital gain in a taxable account. The gains are in individual stocks and I want to move the money into index funds. I would also like to move a rollover IRA into a Roth IRA, but that may not be feasible since I am 61 (I probably need to have everything in place before drawing social security).

I am looking for an enrolled agent. An EA is certified (a two day exam) to represent clients to the IRS. They are specialized in tax issues. Here is a website to find EAs in your area: taxexperts.NAEA.org

There were at least 100 EAs in my area, but only one of them also offered financial planning advice as well. For $1,500 I can hire them to go over my portfolio and make recommendations to work toward my goals.

Good luck with whatever you decide.
Enrolled Agents...CPA...Bogleheads...in the end, generally, it boils down to reduce risk by paying A LOT of tax, or suffer with more risk but avoiding a big tax. There is no easy solution.

CnC
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Re: Taking $1M+ Long Term Capital Gains

Post by CnC » Fri Jun 15, 2018 1:52 pm

$479,000 max income limit per year if married. Assuming you are reasonably below that.


Take 4-5 yearly bites of it. Dodge the 20% ltcg.

viewer0
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Re: Taking $1M+ Long Term Capital Gains

Post by viewer0 » Fri Jun 15, 2018 4:19 pm

wrongfunds wrote:
Fri Jun 15, 2018 11:44 am

If you never thought of selling and taking the gains for last few years even when you had 7 figures in capital gains, what is making you to tackle this "big problem" today?
somehow I am feeling there is a looming market downturn; better realize some profit and move in safer haven. I know I will be rebuked by members here for thinking about timing the market.

@HJG0989 - Thanks for the EA idea.
I’m curious about the long term prospects for the highly appreciated stock in question. My thinking is that if it’s a speculative stock that did well, pay the tax and diversify out. That may be cheaper than continuing the risk that today’s darling will become tomorrow’s dud. But if it’s a solid company, that’s a lot of tax to pay on something that has good prospects over the longer term.
FAANG stocks; hence solid ?


$479,000 max income limit per year if married. Assuming you are reasonably below that.


Take 4-5 yearly bites of it. Dodge the 20% ltcg.
Thanks for the figure of $479K. This would constitute wages + short term gains, correct ? I have to manage my short term gains correctly. Most of it is from expired covered call options.
Assume I go beyond $479K, would ALL my LT CG be taxed at 20%; that does not make sense , as I would be better offer staying below $479K then.
I think this is how it is calculated. Assume my wages+ short term gains is $400K. This will be taxed at regular income tax rate. Then Only $79K ( 479 - 400) of long term capital gains will be taxed at 15% rate, LTCG beyond 79K will be taxed at 20%. Am I correct ?
Last edited by viewer0 on Fri Jun 15, 2018 5:24 pm, edited 1 time in total.

inbox788
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Re: Taking $1M+ Long Term Capital Gains

Post by inbox788 » Fri Jun 15, 2018 5:23 pm

viewer0 wrote:
Fri Jun 15, 2018 4:19 pm
Thanks for the figure of $479K. This would constitute wages + short term gains, correct ? I have to manage my short term gains correctly. Most of it is from expired covered call options.
Assume I go beyond $479K, would ALL my LT CG be taxed at 20%; that does not make sense , as I would be better offer staying below $479K then.
Don't know if it's all that simple. I never understood the AMT, but it may be in play. Professional help may be useful.

https://www.kitces.com/blog/evaluating- ... -amt-bite/

viewer0
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Re: Taking $1M+ Long Term Capital Gains

Post by viewer0 » Fri Jun 15, 2018 5:56 pm

Thanks for the AMT link. Wonder if there is any updated graph for the AMT bump zone for recent years.

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grabiner
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Re: Taking $1M+ Long Term Capital Gains

Post by grabiner » Fri Jun 15, 2018 9:47 pm

viewer0 wrote:
Fri Jun 15, 2018 4:19 pm
Thanks for the figure of $479K. This would constitute wages + short term gains, correct ? I have to manage my short term gains correctly. Most of it is from expired covered call options.
Assume I go beyond $479K, would ALL my LT CG be taxed at 20%; that does not make sense , as I would be better offer staying below $479K then.
I think this is how it is calculated. Assume my wages+ short term gains is $400K. This will be taxed at regular income tax rate. Then Only $79K ( 479 - 400) of long term capital gains will be taxed at 15% rate, LTCG beyond 79K will be taxed at 20%. Am I correct ?
This is correct.

However, there is also the ACA surtax of 3.8% on investment income over $250K. Therefore, you will actually pay 18.8% federal tax on capital gain income up to $479K taxable income, and 23.8% beyond that.

AMT is not likely to affect you, unless you have some unusual income such as employer stock options. The main reason people in your situation would pay AMT in the past is that they have large deductions for state income tax, but that deduction is capped at $10K now.
Wiki David Grabiner

viewer0
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Re: Taking $1M+ Long Term Capital Gains

Post by viewer0 » Sat Jun 16, 2018 9:50 am

Thank you David for your comment.
AMT has hit me for the last 10 years, I did not have stock options exercised.
Is there any chart like this that shows the AMT bump zone for 2017 or 2018 ?
https://www.kitces.com/blog/evaluating- ... -amt-bite/
In 2018, I have gone past the AMT bump and would like to accelerate income, but not too much to move into the highest tax bracket.

gips
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Re: Taking $1M+ Long Term Capital Gains

Post by gips » Sun Jun 17, 2018 12:07 pm

fwiw, we could have paid less tax on our gain but decided it was more important to diversify. as others have indicated, each person has to choose the mix of risk vs tax strategy that works for them.

Bill Bernstein's oft-cited quote is worth reiterating: "If you've won the game, stop playing". We've changed our asset allocation such that a 50% decline in equity and bond prices will mean some belt-tightening but maintain our financial independence.

wisco
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Re: Taking $1M+ Long Term Capital Gains

Post by wisco » Mon Jun 25, 2018 11:22 pm

"If you are interested, Goldman Sachs and Eaton Vance are the big (and possibly only) players in the industry. You can contact either directly to get info on the funds."

@Spencer: I think an exchange fund is a great solution to this problem, and agree Goldman Sachs and Eaton Vance are the big players. Have you found a way to access either of these exchange funds without having to give some broker a large part of your portfolio to manage (on top of the shares going to the exchange fund)? I know the exchange funds charge ~1% per annum, which I think is a reasonable fee for the service provided. However, when I talked to Goldman, they told me that I must also give them ~$10M in additional assets to manage at a fee (depending on the asset class) of roughly 0.5% per year. Eaton Vance told me they won't accept my shares directly and that I must work with a broker to access their exchange fund. So I talked to a broker who had access to the Eaton Vance exchange fund, and he charged 0.25% of the amount invested in the exchange fund per year (on top of Eaton Vance's fees) plus required that I give him at least $2M of additional assets to manage a 1% per year. I want access to an exchange fund and am happy to pay the fees associated with that, but otherwise want to manage my own money and don't want to have to pay a broker to do so. Any solution to this?

Spencer
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Re: Taking $1M+ Long Term Capital Gains

Post by Spencer » Tue Jun 26, 2018 11:02 am

wisco wrote:
Mon Jun 25, 2018 11:22 pm
"If you are interested, Goldman Sachs and Eaton Vance are the big (and possibly only) players in the industry. You can contact either directly to get info on the funds."

@Spencer: I think an exchange fund is a great solution to this problem, and agree Goldman Sachs and Eaton Vance are the big players. Have you found a way to access either of these exchange funds without having to give some broker a large part of your portfolio to manage (on top of the shares going to the exchange fund)? I know the exchange funds charge ~1% per annum, which I think is a reasonable fee for the service provided. However, when I talked to Goldman, they told me that I must also give them ~$10M in additional assets to manage at a fee (depending on the asset class) of roughly 0.5% per year. Eaton Vance told me they won't accept my shares directly and that I must work with a broker to access their exchange fund. So I talked to a broker who had access to the Eaton Vance exchange fund, and he charged 0.25% of the amount invested in the exchange fund per year (on top of Eaton Vance's fees) plus required that I give him at least $2M of additional assets to manage a 1% per year. I want access to an exchange fund and am happy to pay the fees associated with that, but otherwise want to manage my own money and don't want to have to pay a broker to do so. Any solution to this?
I have only dealt with the EV funds personally through Wells Fargo and Merrill Lynch. Both offered the fund at the same cost as outlined in the prospectus/PPM, with no requirements for additionally managed assets. You might try them and see if you have better luck.

wisco
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Re: Taking $1M+ Long Term Capital Gains

Post by wisco » Tue Jun 26, 2018 12:47 pm

Big thanks, Spencer. I'll contact them.

libralibra
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Re: Taking $1M+ Long Term Capital Gains

Post by libralibra » Fri Jun 29, 2018 10:16 pm

This 2-part article walks thru the different strategies of using puts, put spreads, collars, put spread collars, shorting, exchange funds, stock protection funds, and tax-optimized equity portfolios to manage single stock risk.
http://www.nysscpa.org/news/publication ... tock-gains
http://www.nysscpa.org/news/publication ... tock-gains

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welderwannabe
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Re: Taking $1M+ Long Term Capital Gains

Post by welderwannabe » Sat Jun 30, 2018 10:44 am

HJG0989 wrote:
Fri Jun 15, 2018 12:22 pm


I am looking for an enrolled agent. An EA is certified (a two day exam) to represent clients to the IRS. They are specialized in tax issues. Here is a website to find EAs in your area: taxexperts.NAEA.org

There were at least 100 EAs in my area, but only one of them also offered financial planning advice as well. For $1,500 I can hire them to go over my portfolio and make recommendations to work toward my goals.

Good luck with whatever you decide.
A CPA can also represent you in front of the IRS. They have very similar rights in that regard to that of an enrolled agent.

I wouldn't limit your search to just enrolled agents.
I am not an investment professional, but I did stay at a Holiday Inn Express last night.

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