Taking $1M+ Long Term Capital Gains

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viewer0
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Taking $1M+ Long Term Capital Gains

Post by viewer0 » 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

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

Post by Gill » Tue Jun 12, 2018 8:04 pm

It seems relevant to disclose the size and composition of your portfolio to give a proper answer. Is this gain 5% of your portfolio or 90%?
Gill

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

Post by delamer » Tue Jun 12, 2018 8:34 pm

Unless you are quite elderly, it is unlikely that you’ll never see another bull market even if there is a correction/bear in 2018.

Why do you want to get completely out of these positions at this point in time?

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

Post by AlohaJoe » Tue Jun 12, 2018 8:44 pm

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.
Fill out several test tax returns using different amounts of capital gains, see the results, and then decide what you want to do.

There is no optimum amount of long term capital gains. There is only an optimum amount of adjusted gross income and your filing status. If you have $0 additional income then the optimum amount of long term capital gains is $38,600 if you are single and $77,200 if you are joint and $51,700 if you are head of household. If you have additional income of $479,000 and are joint then the optimum amount of long term capital gains is $1,000,000+.

Then you have to decide whether "optimum" is too long for your purposes. In general you want to stay under the NIIT threshold, if you can. But the threshold is $250,000 a year in adjusted gross income. If you already have $100,000 in other income then that means only $150,000 a year in capital gains harvested. Which mean it would take you 8+ years to harvest all your gains.

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

Post by Pajamas » Tue Jun 12, 2018 8:48 pm

Since you have $2 million of long term capital gains and are convinced that you need to sell now, go ahead and do it now. Don't let the tax tail wag the investment dog.

Otherwise, the best thing for you to do if you have little understanding of taxes and $2 million in capital gains would be to hire a tax specialist.

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

Post by MrPotatoHead » Tue Jun 12, 2018 8:53 pm

Hmmm...first post a market timing post. That aside...

Since these are individual stocks you may want to figure out your optimum capital gains strategy and look at put options in order to protect the remainder of what you cannot sell in a given year.

The following url may prove useful if you wish to explore this idea:

https://www.fidelity.com/viewpoints/act ... ur-profits

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

Post by Toons » Tue Jun 12, 2018 8:57 pm

Sell,
Pay the capital gains tax.
An inherent part of making money in the investment world.
It is a bunch of numbers moving around.

:happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

123
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Re: Taking $1M+ Long Term Capital Gains

Post by 123 » Tue Jun 12, 2018 9:00 pm

If I were you I'd be kicking my heels high because the gains all happened in taxable investments instead of a retirement account with so much higher tax rates.
The closest helping hand is at the end of your own arm.

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

Post by mike_in_ny » Tue Jun 12, 2018 9:11 pm

I agree that you shouldn't let taxes prevent you from executing your investment
plan, whatever that is. Many people have been in similar situations with Options
or RSUs and have kicked themselves waiting for best tax treatment.

That said, I'd suggest loading up a Donor Advised Fund if that's your thing.

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Taylor Larimore
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Re: Taking $1M+ Long Term Capital Gains

Post by Taylor Larimore » Tue Jun 12, 2018 9:30 pm

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:

Welcome to the Bogleheads Forum!

In my opinion, considering $2M Long-Term Capital Gains, you should seek the advice of a professional tax-specialist.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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

Post by Leesbro63 » Tue Jun 12, 2018 10:04 pm

Perhaps never sell and never pay cap gains taxes. Ride the market’s ups and downs but hold tight and never pay tax like Warren Buffett. The permanent tax paid is gone forever. Market drops have good probabilities (but, granted, no guarantees) of being only temporary.

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

Post by viewer0 » 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.

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

Post by gmaynardkrebs » Wed Jun 13, 2018 8:20 am

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.
If the point of this is to pull out before the bear bites you, I don't see how putting the money in an S&P500 helps much, unless you mean go to cash, wait for the decline, and then buy the SP500 fund. Not many here would endorse market timing, however.

mountain-lion
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Re: Taking $1M+ Long Term Capital Gains

Post by mountain-lion » Wed Jun 13, 2018 10:25 am

Something that may or may not matter to you, depending on where you live:

California has a surcharge tax of 1% on income (including capital gains) over $1M. Not that this should be the governing factor, necessarily, but if you live in California, selling off in two year-straddling tranches may make sense to stay below that amount, especially if you don't typically hit that limit.

More generally, multi-tranching things to keep the profits below a certain tax bracket can be wise.

But all of this would be an optimization of the logistics, if you decided to sell. Whether or not you sell probably shouldn't be governed by tax minimization, just some of the details.

crossroad101
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Re: Taking $1M+ Long Term Capital Gains

Post by crossroad101 » Wed Jun 13, 2018 10:43 am

I apologize for interjecting. I have a similar situation where I am trying to consolidate my taxable portion of all stocks with sizable capital gains 280K portfolio with > 150K capital gains. This forms approx. 70% of my entire savings. For various reasons I am forced to go with the taxable account. I am very much interested in the comments on this thread if it is similarly applicable to a MFJ with a 115k or so gross income and likely the capital gains (mostly long term) are something I should concern about if I am looking to diversify and consolidate everything at Vanguard PAS. If I should ask in a separate thread, please let me know.

Thank you.
crossroad101

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

Post by Pajamas » Wed Jun 13, 2018 10:53 am

crossroad101 wrote:
Wed Jun 13, 2018 10:43 am
I apologize for interjecting. I have a similar situation where I am trying to consolidate my taxable portion of all stocks with sizable capital gains 280K portfolio with > 150K capital gains. This forms approx. 70% of my entire savings. For various reasons I am forced to go with the taxable account. I am very much interested in the comments on this thread if it is similarly applicable to a MFJ with a 115k or so gross income and likely the capital gains (mostly long term) are something I should concern about if I am looking to diversify and consolidate everything at Vanguard PAS. If I should ask in a separate thread, please let me know.

Thank you.
crossroad101
Probably would be best to ask in a separate thread to get more responses, but you might be able to simply transfer your holdings to Vanguard without selling them and incurring capital gains. Of course there are some investments that are proprietary and can't be accepted in a transfer.

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Re: Taking $1M+ Long Term Capital Gains

Post by inbox788 » Wed Jun 13, 2018 4:14 pm

MrPotatoHead wrote:
Tue Jun 12, 2018 8:53 pm
Hmmm...first post a market timing post. That aside...

Since these are individual stocks you may want to figure out your optimum capital gains strategy and look at put options in order to protect the remainder of what you cannot sell in a given year.

The following url may prove useful if you wish to explore this idea:

https://www.fidelity.com/viewpoints/act ... ur-profits
Options is a good idea. Look at collars, which buying the protective put is half the strategy; sell calls to pay for the puts so overall costs are nearly zero.

Also, do you have $2M+ portfolio with lots of gains, or a much larger portfolio and $2M+ of gains alone? I don't suppose your cost basis is close to $1 and they're one and the same.

The more you share, the better advice you will get. At the very least, it may be helpful to list the top 10 holdings, cost basis (at least percentage), and what percent of your total portfolio they represent. You're basically running your own personal active fund right now and not really being compensated much for your work.

tesuzuki2002
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Re: Taking $1M+ Long Term Capital Gains

Post by tesuzuki2002 » Wed Jun 13, 2018 4:26 pm

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
donate the shares... never pay taxes again!!

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

Post by viewer0 » Wed Jun 13, 2018 7:23 pm

Options is a good idea. Look at collars, which buying the protective put is half the strategy; sell calls to pay for the puts so overall costs are nearly zero.

Also, do you have $2M+ portfolio with lots of gains, or a much larger portfolio and $2M+ of gains alone? I don't suppose your cost basis is close to $1 and they're one and the same.

The more you share, the better advice you will get. At the very least, it may be helpful to list the top 10 holdings, cost basis (at least percentage), and what percent of your total portfolio they represent. You're basically running your own personal active fund right now and not really being compensated much for your work.
Right now I am selling call options every week. Yes, I will buy puts and sell calls in future.
My stocks are FAANG stocks that have been accrued over the last 20 years. This consists 90% of the portfolio. Gain is $2M+. Cost basis is very low.
My idea is to take the tax hit, then be a moderate risk taker and incrementally ( every month) invest the cash in S&P500 ( not trying to time the market).

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

Post by schrute » Wed Jun 13, 2018 7:44 pm

viewer0 wrote:
Wed Jun 13, 2018 7:23 pm
Options is a good idea. Look at collars, which buying the protective put is half the strategy; sell calls to pay for the puts so overall costs are nearly zero.

Also, do you have $2M+ portfolio with lots of gains, or a much larger portfolio and $2M+ of gains alone? I don't suppose your cost basis is close to $1 and they're one and the same.

The more you share, the better advice you will get. At the very least, it may be helpful to list the top 10 holdings, cost basis (at least percentage), and what percent of your total portfolio they represent. You're basically running your own personal active fund right now and not really being compensated much for your work.
Right now I am selling call options every week. Yes, I will buy puts and sell calls in future.
My stocks are FAANG stocks that have been accrued over the last 20 years. This consists 90% of the portfolio. Gain is $2M+. Cost basis is very low.
My idea is to take the tax hit, then be a moderate risk taker and incrementally ( every month) invest the cash in S&P500 ( not trying to time the market).
How old are you? Why not spread it out over a few years? FAANGs are doing well.

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

Post by Spencer » Wed Jun 13, 2018 8:14 pm

Sounds like you have a handful of concentrated individual stock positions with large capital gains, that you plan to sell, and immediately reinvest into a broad market index (ie, S&P500)?

If so, I'd highly recommend you look into an exchange fund. This is a private placement fund that takes advantage of a tax loophole for partnerships. Effectively, you contribute your appreciated stock to the fund, which maintains a large portfolio of other appreciated stock from other partners, and the portfolio is constructed to track a market index (S&P 500/1000 or similar). After 7 years, you are eligible to redeem your shares in the fund for a diversified basket of stocks, or you can stay in the fund. Your basis in the fund or stock basket will stay at the same level as your original shares. It's effectively a way to convert concentrated single stock positions into an index fund tax-free.

Of course, there are fees, restrictions, and the potential that your holdings are over allocated in the fund, so they won't accept them, but its worth looking into before you sell your positions. On the fee side, it's not vanguard levels, but long term, its much cheaper than paying cap gains, especially if you are in a high tax state, and again, you can redeem after 7 years, at which point you're back to being fee-free with a basket of stocks.

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.

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

Post by TravelforFun » Wed Jun 13, 2018 8:15 pm

Sell what you need and leave the rest to heirs so they can get the step-up.

TravelforFun

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

Post by onthecusp » Wed Jun 13, 2018 8:23 pm

viewer0,

Not sure why people are having trouble with your plan of moving these investments to an index fund. Seems pretty bogleheadish to me. You have done well and recognize that excessively good things will likely come to an end (the old risk / reward balance). The smart thing to do with a large amount of investment assets is to go with a low cost index strategy.

I could certainly see spacing it out over a couple of years vs all at once if there are tax advantages confirmed by analysis or a CPA.

Rather than all in an S&P 500 fund, a good alternative would be to establish a Stock / Bond asset allocation and go with a three fund portfolio. Then you can rebalance rather than time. Search the site for 3 fund portfolio and continue asking questions! It is a big adjustment going from aggressive investing to a buy and hold lower volatility strategy.

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

Post by viewer0 » Wed Jun 13, 2018 8:36 pm

@Spencer

Thanks for your advice. I will look into exchange funds. Only problem is the 7 year holding period. Can I sell an ETF to these exchange funds ?

@onthecusp

Thanks for the advice on three fund portfolio. I have never owned a bond other than some $100K I/EE Bonds when they were hot.

@schrute

I am 50
Last edited by viewer0 on Thu Jun 14, 2018 6:34 am, edited 1 time in total.

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

Post by paisano » Wed Jun 13, 2018 9:09 pm

Spencer wrote:
Wed Jun 13, 2018 8:14 pm

If so, I'd highly recommend you look into an exchange fund. This is a private placement fund that takes advantage of a tax loophole for partnerships. Effectively, you contribute your appreciated stock to the fund, which maintains a large portfolio of other appreciated stock from other partners, and the portfolio is constructed to track a market index (S&P 500/1000 or similar). After 7 years, you are eligible to redeem your shares in the fund for a diversified basket of stocks, or you can stay in the fund. Your basis in the fund or stock basket will stay at the same level as your original shares. It's effectively a way to convert concentrated single stock positions into an index fund tax-free.
Morgan Stanley has a whitepaper on these titled "Exchange Funds: An Important Alternative for Your Asset Allocation." You must be a "qualified purchaser" to participate (currently defined by the SEC as $5 million in investments; see https://www.law.cornell.edu/uscode/text/15/80a-2). They are also required to hold 20% in something like real estate assets.

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

Post by MrPotatoHead » Wed Jun 13, 2018 11:06 pm

Spencer wrote:
Wed Jun 13, 2018 8:14 pm
Sounds like you have a handful of concentrated individual stock positions with large capital gains, that you plan to sell, and immediately reinvest into a broad market index (ie, S&P500)?

If so, I'd highly recommend you look into an exchange fund. This is a private placement fund that takes advantage of a tax loophole for partnerships. Effectively, you contribute your appreciated stock to the fund, which maintains a large portfolio of other appreciated stock from other partners, and the portfolio is constructed to track a market index (S&P 500/1000 or similar). After 7 years, you are eligible to redeem your shares in the fund for a diversified basket of stocks, or you can stay in the fund. Your basis in the fund or stock basket will stay at the same level as your original shares. It's effectively a way to convert concentrated single stock positions into an index fund tax-free.

Of course, there are fees, restrictions, and the potential that your holdings are over allocated in the fund, so they won't accept them, but its worth looking into before you sell your positions. On the fee side, it's not vanguard levels, but long term, its much cheaper than paying cap gains, especially if you are in a high tax state, and again, you can redeem after 7 years, at which point you're back to being fee-free with a basket of stocks.

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.
Wow, thank you; I learned something totally new(to me) today. That is pretty cool...

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

Post by viewer0 » Thu Jun 14, 2018 9:02 am

While researching exchange funds, it is fairly illiquid for 7 years, that is a bummer. On the other hand, I can think of it as inheritance of my kids, which they will inherit after 7 years.
I understand the asset value that one should have ($5M+), but how much can one put in an exchange fund, e.g. can I put just 1000 AAPL stock in the exchange fund ? -- I found out the answer to this - you need to put $1M worth of one stock in the exchange fund.

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

Post by Artsdoctor » Thu Jun 14, 2018 10:00 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
You're not giving enough information (other income, state residence, ability to itemize, etc.). You may think that you're sitting on $2M gains, but if you're in a high-tax state, you're going to be paying about $650,000 in federal and state taxes on those gains. That's a pretty bitter pill to swallow. Or, put another way, you could be paying more than 15% of your entire portfolio in taxes . . .

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

Post by Leesbro63 » Thu Jun 14, 2018 10:22 am

viewer0 wrote:
Thu Jun 14, 2018 9:02 am
While researching exchange funds, it is fairly illiquid for 7 years, that is a bummer. On the other hand, I can think of it as inheritance of my kids, which they will inherit after 7 years.
I understand the asset value that one should have ($5M+), but how much can one put in an exchange fund, e.g. can I put just 1000 AAPL stock in the exchange fund ? -- I found out the answer to this - you need to put $1M worth of one stock in the exchange fund.
What are the fees with these funds?

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

Post by Spencer » Thu Jun 14, 2018 10:49 am

viewer0 wrote:
Thu Jun 14, 2018 9:02 am
While researching exchange funds, it is fairly illiquid for 7 years, that is a bummer. On the other hand, I can think of it as inheritance of my kids, which they will inherit after 7 years.
I understand the asset value that one should have ($5M+), but how much can one put in an exchange fund, e.g. can I put just 1000 AAPL stock in the exchange fund ? -- I found out the answer to this - you need to put $1M worth of one stock in the exchange fund.
Actually, they are very liquid, but if you redeem shares within the first 7 years, you'll receive your original contributed securities back, which somewhat defeats the purpose of the fund.

There is no hard minimum over all exchange funds, but in general, mid 6 figures is usually a floor. There is also a bit of self selection, meaning, most qualified purchasers ($5m+ investable assets) are not going to deal with an exchange fund for a stock that represents 5-10% of their portfolio. Also note that security approval is a big issue. If the fund already has too much XYZ stock, they won't accept anymore until its been redeemed or the fund grows.
Leesbro63 wrote:
Thu Jun 14, 2018 10:22 am

What are the fees with these funds?
60-100 basis points/year is what I've seen. On top of that, there can be a placement fee of 1-3% depending on the value of the contribution. Generally over $5m has no placement fee.

This is a fairly obscure niche product for very large concentrated positions, but thought it might be relevant to the OP.
Last edited by Spencer on Thu Jun 14, 2018 12:30 pm, edited 1 time in total.

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

Post by viewer0 » Thu Jun 14, 2018 12:15 pm

Artsdoctor wrote:
Thu Jun 14, 2018 10:00 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
You're not giving enough information (other income, state residence, ability to itemize, etc.). You may think that you're sitting on $2M gains, but if you're in a high-tax state, you're going to be paying about $650,000 in federal and state taxes on those gains. That's a pretty bitter pill to swallow. Or, put another way, you could be paying more than 15% of your entire portfolio in taxes . . .

$350K income from salary
State of residence : MA
ability of itemize : Null; no mortgage

What other info can be helpful ?

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

Post by Artsdoctor » Thu Jun 14, 2018 1:25 pm

^ So I'm not an accountant, and it looks as if the MA rate on capital gains is 5.1% (but please double-check this). Consequently, you're going to pay at least 28.9% tax on that $2M gain (20% federal tax on LG CG, 3.8% NIIT, and 5.1% MA). So your tax bill will be at least $578,000.

Although I'm a big proponent of working through these things with tax software, the amount of tax you're talking about would justify going over this with your accountant before considering this.

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

Post by viewer0 » Thu Jun 14, 2018 1:28 pm

Artsdoctor wrote:
Thu Jun 14, 2018 1:25 pm


Although I'm a big proponent of working through these things with tax software, the amount of tax you're talking about would justify going over this with your accountant before considering this.
There is no such person today :happy

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

Post by wrongfunds » Thu Jun 14, 2018 1:37 pm

viewer0 wrote:
Thu Jun 14, 2018 1:28 pm
Artsdoctor wrote:
Thu Jun 14, 2018 1:25 pm


Although I'm a big proponent of working through these things with tax software, the amount of tax you're talking about would justify going over this with your accountant before considering this.
There is no such person today :happy
Can there ever be such a person? I mean this looks as clear cut as ever possible. An accountant is NOT going to find non-existent trick. If you realize the capital gains, you will pay the taxes. If you let it ride, it could double or it could become half.

In the end, it comes to answering the famous Clint Eastwood question "Do you feel lucky?"

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

Post by ausmatt » Thu Jun 14, 2018 2:00 pm

TravelforFun wrote:
Wed Jun 13, 2018 8:15 pm
Sell what you need and leave the rest to heirs so they can get the step-up.

TravelforFun
THIS. make sure you understand this before you sell and/or if you are worried about estate tax limits

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

Post by bradpevans » Thu Jun 14, 2018 2:30 pm

viewer0 wrote:
Thu Jun 14, 2018 12:15 pm
Artsdoctor wrote:
Thu Jun 14, 2018 10:00 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
You're not giving enough information (other income, state residence, ability to itemize, etc.). You may think that you're sitting on $2M gains, but if you're in a high-tax state, you're going to be paying about $650,000 in federal and state taxes on those gains. That's a pretty bitter pill to swallow. Or, put another way, you could be paying more than 15% of your entire portfolio in taxes . . .

$350K income from salary
State of residence : MA
ability of itemize : Null; no mortgage

What other info can be helpful ?
I think the "game" is between selling it all now, causing one single huge tax hit, but knowing the price (and avoid a drop)

If you sell in (small enough) pieces per year you can still hold at 15% LTCG (while larger profits while hit the 20% LTCG)
That might take you quite a while. You could sell in late Dec / early January to cash flow it like one sale but tax it as two.

Is there an option to sell share with less gains? (or is it all just one single lot?)

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

Post by viewer0 » Thu Jun 14, 2018 3:11 pm

Is there an option to sell share with less gains? (or is it all just one single lot?)
Tomorrow I am thinking, I will let some covered call options exercised and take a $200K gain. There are some shares with cost basis higher which make less gains ( short term), but if I do that , my ordinary income will be higher to put me in a higher tax bracket.

viewer0
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Joined: Tue Jun 12, 2018 7:46 pm

Re: Taking $1M+ Long Term Capital Gains

Post by viewer0 » Thu Jun 14, 2018 3:24 pm

wrongfunds wrote:
Thu Jun 14, 2018 1:37 pm
viewer0 wrote:
Thu Jun 14, 2018 1:28 pm
Artsdoctor wrote:
Thu Jun 14, 2018 1:25 pm


Although I'm a big proponent of working through these things with tax software, the amount of tax you're talking about would justify going over this with your accountant before considering this.
There is no such person today :happy
Can there ever be such a person? I mean this looks as clear cut as ever possible. An accountant is NOT going to find non-existent trick. If you realize the capital gains, you will pay the taxes. If you let it ride, it could double or it could become half.
I like the question. There could be some hidden tricks like the exchange funds ( which you are supposed to keep secret according to IRS laws!).
Any opinion of a sophisticated accountant in forum ?

gips
Posts: 360
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Re: Taking $1M+ Long Term Capital Gains

Post by gips » Thu Jun 14, 2018 3:42 pm

I co-founded a business and we received that order of magnitude of a publicly traded security for our company. We had a big, famous accounting firm look at minimizing our cap gains, the best they came up with was moving to a low tax state. One of the founders moved to fl. and saved about $300k. If the ma. tax is 5%, you may be able to save $100k with a move.

Unfortunately, the timing wasn't right for us (kids in high school, roots in the community, couldn't work remotely). Perhaps the timing is better for you.

viewer0
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Joined: Tue Jun 12, 2018 7:46 pm

Re: Taking $1M+ Long Term Capital Gains

Post by viewer0 » Thu Jun 14, 2018 3:46 pm

Interesting concept of moving.
What does moving entail ? When you sell the stock, you are in a low taxed state ? Is there any residency time limit ? Not feasible in my case now ( for same reasons as yours), but can explore few years down.
Last edited by viewer0 on Thu Jun 14, 2018 3:47 pm, edited 1 time in total.

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

Post by wrongfunds » Thu Jun 14, 2018 3:46 pm

Any opinion of a sophisticated accountant in forum ?
for a small small fee of $50,000 I will render my opinion (assuming I am that sophisticated accountant in forum)

Seriously, please do more research on that "exchange fund" trick. I am afraid you will most likely find a serious flaw that you will not be able to live with.

Oh come on, if you are resident of a no income tax state, you automatically save that money. Do you need high priced accountant to tell you that?

viewer0
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Joined: Tue Jun 12, 2018 7:46 pm

Re: Taking $1M+ Long Term Capital Gains

Post by viewer0 » Thu Jun 14, 2018 4:59 pm

Is my understanding correct, that if you earn ( salary + short term capital gains) > $425,800 in 2018, you are taxed at 20% for long term capital gains ?
What is the delta that 20% will apply to ?
Let's say, I earn $500K from salary and short term capital gains ( thereby hitting the 20% threshold), and have a $300K LTCG, where would 20% be applied to ?

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Artsdoctor
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Location: Los Angeles, CA

Re: Taking $1M+ Long Term Capital Gains

Post by Artsdoctor » Thu Jun 14, 2018 5:09 pm

wrongfunds wrote:
Thu Jun 14, 2018 1:37 pm
viewer0 wrote:
Thu Jun 14, 2018 1:28 pm
Artsdoctor wrote:
Thu Jun 14, 2018 1:25 pm


Although I'm a big proponent of working through these things with tax software, the amount of tax you're talking about would justify going over this with your accountant before considering this.
There is no such person today :happy
Can there ever be such a person? I mean this looks as clear cut as ever possible. An accountant is NOT going to find non-existent trick. If you realize the capital gains, you will pay the taxes. If you let it ride, it could double or it could become half.

In the end, it comes to answering the famous Clint Eastwood question "Do you feel lucky?"
Actually, I've learned a lot from my accountant over the years. It's not so much that an accountant would have a magic trick, but there is plenty of room for education here.

First, the OP's income is $350,000 per year. How charitably inclined is he? There are plenty of people making that kind of income that would have 5-10% in charitable contributions per year. So let's say there's an annual charitable contribution of $17,500. One year is not going to get him on Schedule A but if he wants to open a DAF and put 5 years of contributions in it, all of a sudden, there's a $87,500 charitable contribution on Schedule A. He gets rid of the capital gain on the shares with the most gain and pockets the tax savings by itemizing. You can play with the needle a bit and the accountant has the software to do it.

Also, I've seen plenty of people in Los Angeles you sell their houses after 30 years of price appreciation and are absolutely shocked by the taxes they pay on the capital gains. I would think anyone you would be making $2M in capital gains would want to know pretty close to the amount that would be due in taxes. It may be that the allure of selling everything all at once is lost once that $500,000 tax bill sets in.

viewer0
Posts: 20
Joined: Tue Jun 12, 2018 7:46 pm

Re: Taking $1M+ Long Term Capital Gains

Post by viewer0 » Thu Jun 14, 2018 5:14 pm

Let's not take charity in the calculation.
I am interested to know on what amount the 20% capital gains kick in.

jebmke
Posts: 7877
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Re: Taking $1M+ Long Term Capital Gains

Post by jebmke » Thu Jun 14, 2018 5:21 pm

viewer0 wrote:
Thu Jun 14, 2018 5:14 pm
Let's not take charity in the calculation.
I am interested to know on what amount the 20% capital gains kick in.
More significantly, though, the transition from 15% to 20% capital gains rates will also continue to use the “old” top tax bracket thresholds of $425,800 for individuals and $479,000 for married couples – which would now fall in the middle of the new 35% brackets, rather than being aligned to the top 37% brackets. Even as the 3.8% Medicare surtax on net investment income will also continue to apply with its own not-indexed-for-inflation thresholds of $200,000 of AGI for individuals ($250,000 for married couples).
https://www.kitces.com/blog/final-gop-t ... trategies/
When you discover that you are riding a dead horse, the best strategy is to dismount.

Spencer
Posts: 92
Joined: Wed Mar 19, 2014 10:20 am

Re: Taking $1M+ Long Term Capital Gains

Post by Spencer » Thu Jun 14, 2018 5:35 pm

wrongfunds wrote:
Thu Jun 14, 2018 3:46 pm
Any opinion of a sophisticated accountant in forum ?
for a small small fee of $50,000 I will render my opinion (assuming I am that sophisticated accountant in forum)

Seriously, please do more research on that "exchange fund" trick. I am afraid you will most likely find a serious flaw that you will not be able to live with.

Oh come on, if you are resident of a no income tax state, you automatically save that money. Do you need high priced accountant to tell you that?
What's the serious flaw you've found with exchange funds? I've read the prospectuses for most of the big funds, talked to the sponsors, and while there are some less than ideal features to these funds, mostly due to the tax law, I didn't find any deal breakers that weren't worth the tax savings. Curious what I missed... :confused

viewer0
Posts: 20
Joined: Tue Jun 12, 2018 7:46 pm

Re: Taking $1M+ Long Term Capital Gains

Post by viewer0 » Thu Jun 14, 2018 5:51 pm

I am very confused with the tax brackets as I am seeing various numbers in various websites. Where can I find the correct information ?
In my example, what should I earn in 2018 ( salary + short term gains ) so that I do not hit the 20% LTCG ? Married Filing Jointly.

jebmke
Posts: 7877
Joined: Thu Apr 05, 2007 2:44 pm

Re: Taking $1M+ Long Term Capital Gains

Post by jebmke » Thu Jun 14, 2018 5:54 pm

viewer0 wrote:
Thu Jun 14, 2018 5:51 pm
I am very confused with the tax brackets as I am seeing various numbers in various websites. Where can I find the correct information ?
In my example, what should I earn in 2018 ( salary + short term gains ) so that I do not hit the 20% LTCG ? Married Filing Jointly.
The definitive rates are in the bill. I think this is the final bill that was passed.

https://www.congress.gov/bill/115th-con ... format=txt

I am also fairly confident that the Kitces information is correct.
When you discover that you are riding a dead horse, the best strategy is to dismount.

wrongfunds
Posts: 1674
Joined: Tue Dec 21, 2010 3:55 pm

Re: Taking $1M+ Long Term Capital Gains

Post by wrongfunds » Thu Jun 14, 2018 6:05 pm

Either get the income tax spreadsheet 2018 (the URL was found in this forum; I do not remember it though) or TaxCaster App on the phone to estimate your 2018 taxes. It should be trivial to figure that out.

inbox788
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Joined: Thu Mar 15, 2012 5:24 pm

Re: Taking $1M+ Long Term Capital Gains

Post by inbox788 » Thu Jun 14, 2018 6:46 pm

viewer0 wrote:
Thu Jun 14, 2018 5:51 pm
I am very confused with the tax brackets as I am seeing various numbers in various websites. Where can I find the correct information ?
In my example, what should I earn in 2018 ( salary + short term gains ) so that I do not hit the 20% LTCG ? Married Filing Jointly.
Don't worry about going over a bit. There's the level where you're equivalent plus or minus a percent or two. Just don't reach the next level. And if you're already over your predicted level, the not hitting your 20% goal is ok too.

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