Last-minute moves to ease the tax bite

The Ticker

December 10, 1997|By Julius Westheimer

TO SAVE tax money on April 15, consider these year-end moves.

Most important, with only 15 business days remaining this year, see your tax adviser or accountant promptly. The Taxpayer Relief Act of 1997 complicates capital gains taxation by imposing three different tax rates for various categories of capital transactions.

Despite the complications, some basic strategies remain unchanged. Some general suggestions:

Offset gains with losses.

"If your 1997 capital gains exceed your losses, you will owe tax," says Tax Hotline, December, adding, "The federal tax on these gains might run anywhere from 20 percent to 39.6 percent, depending on your holding period and sale date. So, if you have a net loss, you'll avoid taxes."

The best portfolios -- even in a booming stock market like 1997's -- are likely to have a few holdings that don't work out well. Personal Finance newsletter says, "Selling stocks at a loss seems counterproductive, but it makes sense if you replace losers with stocks having better prospects. Also, you can use the realized capital loss to offset capital gains that are realized for the same year."

Speaking of gains and losses, Kiplinger's Personal Finance magazine, January, advises, "Take your time filing your 1997 income tax return if you have capital gains or losses.

"Returns with a Schedule D won't be processed until mid-February, at the earliest, because Congress took so long to explain to the IRS how some of last summer's tax changes should be implemented."

TICKER REMINDER: Although tax savings are important, never let tax considerations dictate investment judgment. Too many times, I've seen tax-saving strategies backfire when people sold stocks at a loss for tax purposes, only to see those sold issues double, triple, split -- and move even higher.

QUICKIES: "Don't mess up your tax return by writing checks against your bond funds." (Wall Street Journal)

"When you sell a stock or mutual fund in your nonretirement account, sell all your shares at one time. That procedure makes it easier to figure your taxable gain or loss." (CNBC-TV)

"The provisions of the 1997 tax legislation will affect nearly every taxpayer -- individuals and businesses." (Gross, Mendelsohn & Assoc., certified public accountants)

Pub Date: 12/10/97

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