Liquidate my individual stocks now?

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Mayacallie
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Liquidate my individual stocks now?

Post by Mayacallie »

I’ve been a committed Boglehead for over 25 years. Currently retired, 68 y.o. Prior to that, I invested in individual stocks, some of which I’ve held for over 30 years
These 10 stocks now account for about 10% of my net worth, with a LTCG of a little over 3.6 mm. BIG tax bill. No losses to harvest. Always thought I’d wait until my post mortem adjusted the cost basis for my survivors and they’d subsequently index. But that may be 20 or more years. I have fond memories of what happened to my GE and Enron stock. I already give charitably to a level that makes my wife uncomfortable.
The answer is to rip off the bandaid?
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retired@50
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Re: Liquidate my individual stocks now?

Post by retired@50 »

Mayacallie wrote: Thu Feb 08, 2024 5:23 pm I’ve been a committed Boglehead for over 25 years. Currently retired, 68 y.o. Prior to that, I invested in individual stocks, some of which I’ve held for over 30 years
These 10 stocks now account for about 10% of my net worth, with a LTCG of a little over 3.6 mm. BIG tax bill. No losses to harvest. Always thought I’d wait until my post mortem adjusted the cost basis for my survivors and they’d subsequently index. But that may be 20 or more years. I have fond memories of what happened to my GE and Enron stock. I already give charitably to a level that makes my wife uncomfortable.
The answer is to rip off the bandaid?
Keep giving to charity.

If $3.6 million in gain plus the original basis, is only 10% of your net worth, you can easily afford to keep giving. The charitable organization wouldn't have to pay the cap gains tax, and neither would you.

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
worthit
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Re: Liquidate my individual stocks now?

Post by worthit »

Mayacallie wrote: Thu Feb 08, 2024 5:23 pm I’ve been a committed Boglehead for over 25 years. Currently retired, 68 y.o. Prior to that, I invested in individual stocks, some of which I’ve held for over 30 years
These 10 stocks now account for about 10% of my net worth, with a LTCG of a little over 3.6 mm. BIG tax bill. No losses to harvest. Always thought I’d wait until my post mortem adjusted the cost basis for my survivors and they’d subsequently index. But that may be 20 or more years. I have fond memories of what happened to my GE and Enron stock. I already give charitably to a level that makes my wife uncomfortable.
The answer is to rip off the bandaid?
I agree with retired@50. You are an UHNW (ultra high net worth) individual and can afford to do either or. Maybe donate some and pay taxes on some?
Last edited by worthit on Thu Feb 08, 2024 6:01 pm, edited 1 time in total.
livesoft
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Re: Liquidate my individual stocks now?

Post by livesoft »

So if 10% is $3.6 million (which is just the unrealized capital gains), then your portfolio is about $40 million. Let's not beat around the bush here.

What else is in your portfolio? I imagine that you must also have big gains in all those other things, so that if you are selling some of your investments to live the life that you are accustomed to, then you are paying some LTCG taxes anyways. If so, then stop selling the stuff you want to keep and sell the stocks that you don't want to keep in order to pay your living expenses.

OTOH, you can also just let nature takes its course and the "problem" will go away, won't it?
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260chrisb
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Re: Liquidate my individual stocks now?

Post by 260chrisb »

retired@50 wrote: Thu Feb 08, 2024 5:27 pm
Mayacallie wrote: Thu Feb 08, 2024 5:23 pm I’ve been a committed Boglehead for over 25 years. Currently retired, 68 y.o. Prior to that, I invested in individual stocks, some of which I’ve held for over 30 years
These 10 stocks now account for about 10% of my net worth, with a LTCG of a little over 3.6 mm. BIG tax bill. No losses to harvest. Always thought I’d wait until my post mortem adjusted the cost basis for my survivors and they’d subsequently index. But that may be 20 or more years. I have fond memories of what happened to my GE and Enron stock. I already give charitably to a level that makes my wife uncomfortable.
The answer is to rip off the bandaid?
Keep giving to charity.

If $3.6 million in gain plus the original basis, is only 10% of your net worth, you can easily afford to keep giving. The charitable organization wouldn't have to pay the cap gains tax, and neither would you.

Regards,
I like this approach, like the fact that you're a HNWI, love the fact that you're generous and chuckle over the fact that it makes the wife uncomfortable :D !! Well done! If your biggest concern is the LTCGs you have to pay then so be it. Keep giving and at the same time sell some and pay the LTCGs and enjoy the benefits of it.
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illumination
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Re: Liquidate my individual stocks now?

Post by illumination »

What are the 10 stocks? Some of this is a judgement call imo. If it was say shares in Berkshire Hathaway, I'd feel differently than if it was shares in Rivian.

If the main concern is risk, what about some sort of rolling stop loss on at least some portion to protect the downside?

What about gifting shares to people in a lower tax bracket than you?

Truthfully, even though this bucks most of the advice given here, I would probably would let most of it ride (if it was say mega cap companies) and let my heirs take the reset cost basis. You have real estate tax concerns and the cost basis adjustment at death is a valuable tool to preserve your estate. Depending on what your state tax rate is, you're likely looking at close to 7 figures in taxes to exit these positions.
bd7
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Re: Liquidate my individual stocks now?

Post by bd7 »

Mayacallie wrote: Thu Feb 08, 2024 5:23 pm The answer is to rip off the bandaid?
List the stocks. You might be diversified well enough to just not worry about it. Or, maybe not. I wouldn't be in a hurry to pay a pile of tax. Obviously donating appreciated stock is tax friendly. You could probably endow a chair at a university for that, if you are so inclined, whether you can do so all at once depends on your AGI.
Topic Author
Mayacallie
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Re: Liquidate my individual stocks now?

Post by Mayacallie »

bd7 wrote: Thu Feb 08, 2024 6:13 pm
Mayacallie wrote: Thu Feb 08, 2024 5:23 pm The answer is to rip off the bandaid?
List the stocks. You might be diversified well enough to just not worry about it. Or, maybe not. I wouldn't be in a hurry to pay a pile of tax. Obviously donating appreciated stock is tax friendly. You could probably endow a chair at a university for that, if you are so inclined, whether you can do so all at once depends on your AGI.
In order of cap gains MSFT, HD, JNJ,SNY, HON, IEX, LHX, NÉE, WM,WTS, XYL ( in reality 11 stocks)
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familythriftmd
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Re: Liquidate my individual stocks now?

Post by familythriftmd »

Could you move that all into donor advised fund and then give it to charity of choice?
livesoft
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Re: Liquidate my individual stocks now?

Post by livesoft »

familythriftmd wrote: Thu Feb 08, 2024 7:04 pm Could you move that all into donor advised fund and then give it to charity of choice?
Doing it all doesn't make sense to me. At this level of giving one probably cannot deduct it all in a single tax year anyways. I think one could earmark these shares as belonging to one's "personal" DAF and donate them directly to the beneficiary charity. DAFs are great though for small donations of under $50K to charities. Larger stock donations should probably just go directly to the charity.

Besides, gains in a DAF don't get a tax benefit, while gains in one's taxable account do get a benefit. So I use my DAF simply as a conduit: In and Out almost immediately after In..
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Grt2bOutdoors
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Re: Liquidate my individual stocks now?

Post by Grt2bOutdoors »

Mayacallie wrote: Thu Feb 08, 2024 6:55 pm
bd7 wrote: Thu Feb 08, 2024 6:13 pm
Mayacallie wrote: Thu Feb 08, 2024 5:23 pm The answer is to rip off the bandaid?
List the stocks. You might be diversified well enough to just not worry about it. Or, maybe not. I wouldn't be in a hurry to pay a pile of tax. Obviously donating appreciated stock is tax friendly. You could probably endow a chair at a university for that, if you are so inclined, whether you can do so all at once depends on your AGI.
In order of cap gains MSFT, HD, JNJ,SNY, HON, IEX, LHX, NÉE, WM,WTS, XYL ( in reality 11 stocks)
All great companies, all with real revenues and no I didn't have to look the symbols up to recognize who they are.
Microsoft, Home Depot, Johnson and Johnson, Sanofi ADR, Honeywell, Idex (great pick) L-3 Harris, NextEra, Waste Management, Watts Water Tech, Xylem. Did you pick these?

In any event, given that the largest gains seem to be baked into the top 3 lets say, can you donate the appreciated stock into a donor advised fund and diversify the assets that way?

I wouldn't rip the bandaid off and willingly pay a tax of 23.8% fed and state tax, if any to boot in one shot, but you could either do the DAF and/or a direct donation of some portion of shares directly to charity and/or slowly liquidate shares over time. Of course, the markets could go down but that isn't going to prevent an equity based fund to not decline either. Everything will go down in market downdrafts.
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BF3000
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Re: Liquidate my individual stocks now?

Post by BF3000 »

Strong use case for direct indexing via Schwab, fidelity, etc. sell a little every year against tax losses.
Topic Author
Mayacallie
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Re: Liquidate my individual stocks now?

Post by Mayacallie »

All are survivors from my early stock purchases in the mid 80s, some 90s, a couple later. I used to spend too much time and money on Value Line. Never owned more than 20 stocks. Biggest loss was GE, but not close to the gains realized with MSFT alone
Affable at 50
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Re: Liquidate my individual stocks now?

Post by Affable at 50 »

Since they represent less than 10% of your portfolio, I’d suggest holding the stocks and pass along the greatest benefit in the tax code, the step up in basis at death. It will cushion the blow of estate taxes. Fantastic job!

Have you turned off dividend reinvestment for the 11 stocks?
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Darth Xanadu
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Re: Liquidate my individual stocks now?

Post by Darth Xanadu »

livesoft wrote: Thu Feb 08, 2024 7:08 pm Besides, gains in a DAF don't get a tax benefit, while gains in one's taxable account do get a benefit.
I feel like I just had an "ah-ha" moment....but could you please explain this for me so I'm certain I understand? I'm interested in a DAF but just starting to think about it. Thank you, in advance.

Apologies to OP. I think that if you are selling anything to pay for stuff, then you should start with these equity shares (probably look at which holdings represent the largest % of portfolio and/or which have the lowest capital gains). If you aren't selling equity shares to pay for stuff, then there's really no issue since your heirs will eventually receive the step-up in basis.
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Mayacallie
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Re: Liquidate my individual stocks now?

Post by Mayacallie »

Affable at 50 wrote: Thu Feb 08, 2024 8:39 pm Since they represent less than 10% of your portfolio, I’d suggest holding the stocks and pass along the greatest benefit in the tax code, the step up in basis at death. It will cushion the blow of estate taxes. Fantastic job!

Have you turned off dividend reinvestment for the 11 stocks?
Drips were active until about three years ago.
After most posters “talked me down from the cliff,” I’m inclined to let these positions ride. Very few things in life are as distasteful to me as paying taxes. As for more donations-
My entire IRA is going to The Nature Conservancy. Nuff said.
Great posts from all. Thanks!
livesoft
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Re: Liquidate my individual stocks now?

Post by livesoft »

Darth Xanadu wrote: Thu Feb 08, 2024 9:13 pm
livesoft wrote: Thu Feb 08, 2024 7:08 pm Besides, gains in a DAF don't get a tax benefit, while gains in one's taxable account do get a benefit.
I feel like I just had an "ah-ha" moment....but could you please explain this for me so I'm certain I understand?
A. Donate $100,000 to your DAF, but wait until it goes up to $200,000 to dispense out of DAF to charities. You get $100K tax deduction.
-or-
B. Keep $100,000 in taxable until it goes up to $200,000, then donate to your DAF and dispense immediately. You get $200K tax deduction.
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familythriftmd
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Re: Liquidate my individual stocks now?

Post by familythriftmd »

livesoft wrote: Thu Feb 08, 2024 7:08 pm
familythriftmd wrote: Thu Feb 08, 2024 7:04 pm Could you move that all into donor advised fund and then give it to charity of choice?
Doing it all doesn't make sense to me. At this level of giving one probably cannot deduct it all in a single tax year anyways. I think one could earmark these shares as belonging to one's "personal" DAF and donate them directly to the beneficiary charity. DAFs are great though for small donations of under $50K to charities. Larger stock donations should probably just go directly to the charity.

Besides, gains in a DAF don't get a tax benefit, while gains in one's taxable account do get a benefit. So I use my DAF simply as a conduit: In and Out almost immediately after In..
Good to know, thanks! I suppose OP could do one company per year.
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grabiner
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Re: Liquidate my individual stocks now?

Post by grabiner »

Darth Xanadu wrote: Thu Feb 08, 2024 9:13 pm
livesoft wrote: Thu Feb 08, 2024 7:08 pm Besides, gains in a DAF don't get a tax benefit, while gains in one's taxable account do get a benefit.
I feel like I just had an "ah-ha" moment....but could you please explain this for me so I'm certain I understand? I'm interested in a DAF but just starting to think about it. Thank you, in advance.
If you have a stock worth $100K, and it rises in value to $120K, you can get a $120K deduction for donating it to charity. If you donate the stock to a DAF before the market rises, you can donate $120K to charity but you only deducted $100K.

However, if you donate earlier, you get the tax deduction earlier, and thus you have the opportunity to invest the tax savings (unless you are over the 30%-of-AGI deduction limit). In addition, while you continue to hold the stock, you pay tax on any dividends. But working the other way is that the DAF has its own fees, and for small DAFs, the fees are likely to be more than the tax you would pay; for example, Vanguard charges 0.60%.
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Re: Liquidate my individual stocks now?

Post by QBoy »

I don't see any reason to sell these individual stocks. Look at the overall portfolio. You can be well diversified even with some individual stock holdings. Wait for stepped up basis at death. Your heirs will be better off as a result.
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Mayacallie
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Re: Liquidate my individual stocks now?

Post by Mayacallie »

Other than gifting shares to my kids, ( one of which doesn’t pay any cap gains taxes upon conversion to index), I’m not going to sell these positions . Reset basis after I’m dead for the remainder of positions and then convert to index.
I’ve done no Roth conversions on my IRA in anticipation of donating it all just prior to my first RMD in 5 years. Since my estate exceeds limits, the tax ramifications are onerous. QCDs are an alternative, but I’ll just shuttle it all to The Nature Conservancy.
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