2008-2010 zero pct adjusted net capital gain rate

[Ronstar]

Is anyone taking advantage of the 2008-2010 zero pct adjusted net capital gain rate?

Planning for the 2008–2010 Zero-Percent Adjusted Net Capital Gain Rate

WebCPA - Capital gains planning: 2010 sunset date begins to matter

It seems like it would be helpful to take capital gains before 2011. But I haven't yet figured out the details.

[CitricAcid]

December 31st, 2010 will be a very bad day for the stock market.

[Donzo]

I have already sold one investment property and plan to sell others before 2010 - when capital gains taxes go up - we will all have to jump into tax sheltered investments. The amount of revenue the gov. gets from increasing this tax is limited because of the flight to shelter - 15% feels fair - hopefully it won't go up to much...? But I fear it will.

[Lsbcal]

Here's the way I've been figuring what we will take in cap gains:

 
65100         top of 15% bracket for couple
7000           for 2 exemptions
15000 *      Schedule A itemized deductions
-500  *       interest 
-1000 *      dividends
-4000 *      cap gains from taxable funds (distributions)
-------------------------------------------------
 81600       cap gains we can take in 2008 and not pay taxes on this
 
Note the * values are just an example, not our numbers.

Also I'm counting on being able to do this in 2008, 2009 but wouldn't completely count on 2010 since Congress could change that year.

[TromboneAl]

So let's say I want to take advantage of this by selling some Vanguard 500 Index fund shares. Can I/should I place the sell order over the phone, and say, "sell those shares that will give me the largest capital gains," since I won't be paying any tax on them?

[Lsbcal]

Al, at the risk of taking you seriously (or were you joking as per your signature line?) Vanguard probably has something on their web site regarding identifying specific shares for tax purposes.

LSBCAL

[FUEGO]

I already did this. Back at the low point in March of this year I sold a bunch of appreciated stuff and moved it to other funds. Remember the zero percent bracket only extends to the top of the 15% ordinary income bracket. Doesn't really help you a whole lot if you are middle income or higher on the tax brackets already w/o additional gains. I may be able to pay zero % on 5-10k in gains. I plan to use up the zero percent bracket by year end and in the following years if I have any left over. I'm moving from tax inefficient actively managed funds into passive tax efficient index funds.

One thing to keep in mind is state taxes. I'm in a high tax state and I will have to pay 5.5% to 7.5% on all capital gains for state tax, regardless of my federal burden. No free lunch but pretty close.

[SecondCor521]

T-Al,

To comply with IRS rules, you'd have to give them written notification of the specific shares to sell. A phone call would not be sufficient. FIFO is assumed if you don't specify.

2Cor521

[TromboneAl]

Quote:

To comply with IRS rules, you'd have to give them written notification of the specific shares to sell.

Can I write "Sell the shares that will give me the most capital gain" or do I need to write "Sell the shares that I bought on Jan 2,2003"?

Also, is it worth it?

[Serious today]

[SecondCor521]

Quote:

Originally Posted by TromboneAl Can I write "Sell the shares that will give me the most capital gain" or do I need to write "Sell the shares that I bought on Jan 2,2003"? Also, is it worth it? [Serious today]

Check the IRS rules on specific identification of shares. From what I recall, the basic rules are that the instructions have to be (a) written, and (b) be delivered to your agent/broker/whoever prior to the sale, i.e., no after-the-fact tax management.

If it were me, I would use the latter phrasing since it is unambiguous, and I've used such language in the rare cases where I've sold by specific ID.

Whether it's worth it or not is a value judgment. The tax savings are relatively easily quantified. On the flip side, once you sell specific shares that can create a recordkeeping burden on you -- I don't believe you can't go back to the average cost method. Vanguard certainly won't track your individual lot cost bases (basis-es?) for you.

2Cor521