Wednesday, September 05, 2007

Selling Stock Portfolios

Most people typically don't sell huge amounts of stock in a single year unless they need a big loss to offset other large gains.

However, sometimes one has no choice. A common situation is when someone is given or buys stock options for a very low price and hangs onto them hoping the price will really rise.

When this happens, there are times when the company issuing the stock has the opportunity to repurchase these shares or options at a set price. Or, the company is sold and the new company will buy the old shares outright.

Some municipal bonds can also be called if the issuing municipality can refinance the bonds at a lower interest rate. This often makes a sale the best choice, rather than receiving a lower interest rate and reduced income.

So, assuming you sell these assets for more than you originally paid for them, you are faced with a capital gain and capital gains tax.

If the amount is significant, it often behooves you to put a tax savings strategy in place before the sale happens. The Charitable Installment Bargain Sale lends itself well to this situation.

For instance, a million dollar stock sale launched an immediate 337K tax deduction, forgiveness on 55K and a 15 year payout of $92,657 per year for a total of $1,389,859. If tax had been paid at time of sale, it would have totaled around 243K. This tax repayment can now be deferred over 15 years, so nearly one quarter of a million dollars continues to work for the seller earning interest.

The tax deduction also is enough to reduce the sellers income tax bill by 30% over the next six years, resulting in significant additional savings.

The key, as always, is in knowing what options are available and initiating a beneficial tax strategy prior to sale.

Paula Straub

Fill out a qualification questionnaire and find out if you qualify to save capital gains tax. Go to