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Old 12-02-2017, 05:53 PM   #41
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If the FIFO stock sale requirement makes it into the final bill, tax loss harvesting would not work unless the loss is in the first tax lot, or if the loss is large enough that you can sell through the earliest lots to reach the lots with losses.

Alternatively, this could encourage investors to invest in a different ETF for each asset class, e.g. for US LargeCap: VV, VOO, SCHX, IVV, SCHK, MGC, VONE, IWB, SPLG, SPY. The idea is to switch to a new ETF whenever there is major advancement in the asset class. E.g. if I am investing in VV, after a 10% rise in VV, I would switch to the next ETF VOO when I have new funds for investment. In this way, when there is a fall in US LargeCap, I can sell VOO to tax loss harvest without needing to sell the earlier VV shares.

The TLH features touted by the robo advisors like Wealthfront or Betterment would not work easily anymore.
Ultimately this is exactly what some people will do - buy slightly different versions of an asset class so that they have some control over the basis.

And since they only apply this rule to the retail investor, and not to any of the professionally run investment funds, the amount in taxes they are gaining can't be very large at all. Many, many individuals own equities though tax-deferred accounts. What's left has got to be small potatoes.
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Old 12-02-2017, 06:02 PM   #42
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Not quite. The 10% requirement was in place for people under 65 several years ago.


Thanks for the correction. I've only done the medical deductions for the fine folks who come to the senior center, so didn't know this distinction.
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Old 12-02-2017, 06:04 PM   #43
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Next year is RMD time for us. That means about 30% marginal rate for us under current tax law. But under the new tax law proposals, our marginal rate would be around 12%. BTW, I don't think our overall tax bill will be much different so nothing to envy here.

So how to handle charitable donations? For cash donations I'll wait until later in the month. For donations of items (sitting in our garage now), I have to make a decision pretty soon as some of this has to be picked up by a truck.

I think some blended version of this tax law will pass and the marginal rates will be a lot lower then now. So my guess: donate in 2017 assuming you fall in the lower rate areas. Tax rates I've seen (link at: Here's what's in the Senate tax bill - Dec. 2, 2017 ) are:

Quote:
The Senate bill also calls for seven brackets but changes the rates on taxable income to:
- 10% (income up to $9,525 for individuals; up to $19,050 for married couples filing jointly)
- 12% (over $9,525 to $38,700; over $19,050 to $77,400 for couples)
- 22% (over $38,700 to $70,000; over $77,400 to $140,000 for couples)
- 24% (over $70,000 to $160,000; over $140,000 to $320,000 for couples)
- 32% (over $160,000 to $200,000; over $320,000 to $400,000 for couples)
- 35% (over $200,000 to $500,000; over $400,000 to $1 million for couples
- 38.5% (over $500,000; over $1 million for couples)

The House bill, by contrast, only calls for four brackets: 12%, 25%, 35% and 39.6%.
Anybody agree or disagree with this? Opinions welcome.
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Old 12-02-2017, 06:15 PM   #44
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I'm thinking that since the majority in the Senate is slimmer than the majority in the House that the political reality is that the final bill after conference will be closer to the Senate bill than the House bill.
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Old 12-02-2017, 06:16 PM   #45
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Set up a DAF and portion it out equally over the four years? Or are you gifting directly from the IRA (which can't go to a DAF)?
Hmmm, that's a really good idea. I've been lazy in my gifting and just do it from my checking account or credit card. I'm taking a large LTCG this year, maybe I should put some of that in a DAF and disburse it over a few years. That shouldn't be too hard to set up in the next 3 weeks, should it? I'd probably use VG since that's where my account and the fund I'm liquidating is. I'm going to check it out.
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Old 12-02-2017, 06:29 PM   #46
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I'm not sure how the FIFO, no SpecID, thing would work in practice. It seems you could shift assets between brokerages, so no brokerage could know your when all purchases were made, so they practically couldn't report for FIFO.
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Old 12-02-2017, 07:08 PM   #47
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I'm not sure how the FIFO, no SpecID, thing would work in practice. It seems you could shift assets between brokerages, so no brokerage could know your when all purchases were made, so they practically couldn't report for FIFO.
Yes, that too.
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Old 12-02-2017, 07:10 PM   #48
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Why wouldn't the lot level cost basis information just get transferred between brokerages along with the shares? That shouldn't be hard to do.
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Old 12-02-2017, 07:13 PM   #49
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Of course. But you can buy a new set of shares at a different broker, and then sell whichever group has the higher basis later by choosing which brokerage has those shares.
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Old 12-02-2017, 07:14 PM   #50
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Hmmm, that's a really good idea. I've been lazy in my gifting and just do it from my checking account or credit card. I'm taking a large LTCG this year, maybe I should put some of that in a DAF and disburse it over a few years. That shouldn't be too hard to set up in the next 3 weeks, should it? I'd probably use VG since that's where my account and the fund I'm liquidating is. I'm going to check it out.
I first learned of DAFs here, on ER.org and have been using them for 3 years now. Just fantastic on so many accounts. I can also say as a treasurer of a small 501(c)3, it was also nice being on the other side too. Nice to get a check instead of a stock.

DAFs allow this "lumping" which will be more important with a larger standard deduction. But aside from that, the other benefits are much easier management of stock or MF donations, and the ability to control your balance in the fund regarding investments. Donating appreciated securities is, and looks like it still will be, a huge win for all involved (except the tax man).

I will give this little warning. VG Charitable has a $25K minimum opening donation. After that, the minimum is $5k per donation. Fidelity Chariable has a $5k initial donation and may work better for some people.

Our fund is at VG charitable. Their process has been very good and I've had no problems recommending donations to a number of qualified charities.

You still have time, especially if you want to start with a VG mutual fund. An initial donation with anything else may take a bit more time. I suggest if you want to do this, start now, this week. Either VG or Fidelity Charitable should have no problem if you start the opening process this week.

To give you an idea of VG Charitable year end deadlines, here's a snippet of what they sent me regarding deadlines:
Quote:
We strongly suggest making your grant recommendations and contributions as soon as possible to avoid any potential delays.

Security held outside of Vanguard December 15, 2017
Assets held at Vanguard December 21, 2017
Wire or Electronic Bank Transfer December 26, 2017
Check or Stock Certificate December 31, 2017
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Old 12-02-2017, 07:17 PM   #51
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Of course. But you can buy a new set of shares at a different broker, and then sell whichever group has the higher basis later by choosing which brokerage has those shares.
And run the risk of tax fraud when they select you for an tax audit? Sorry, I'll pass.
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Old 12-02-2017, 07:17 PM   #52
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I'm not sure how the FIFO, no SpecID, thing would work in practice. It seems you could shift assets between brokerages, so no brokerage could know your when all purchases were made, so they practically couldn't report for FIFO.
I think this would be similar to the way wash sales are tracked. If your wash sale is in the same account, that broker will report it. But if it happens in a different firm, that firm wouldn't know. It's up to you to report it; if you don't, you might be found out in an audit.
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Old 12-02-2017, 07:21 PM   #53
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If anyone is starting a DAF or donating shares to charity, it should be done this year, so that you can

1) qualify for better deduction, and
2) pick the specific lot to denote while we still have specific ID selection.
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Old 12-02-2017, 07:25 PM   #54
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Does anyone consider going back to using mutual funds (instead of mutual funds) so that you can use the average cost basis method of accounting?
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Old 12-02-2017, 07:35 PM   #55
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Another analysis: https://www.pwc.com/us/en/tax-servic...&elq_cid=40982

Table comparing the bills and current law towards the end and links to the Senate-passed bill (but not searchable).
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Old 12-02-2017, 07:42 PM   #56
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From what I can tell for us it is about a wash but there are a few things.

EE savings bonds tax free for college will go away in 2018. Will go ahead and liquidate the remaining ones this month.
New Rental properties can be depreciated over 25 yrs vs the current 27.5
American Opportunity Credit tacks on a 5th year with 1250 credit max. That will help pay partial for an extra semester of college.
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Old 12-02-2017, 08:02 PM   #57
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And run the risk of tax fraud when they select you for an tax audit? Sorry, I'll pass.
If you sell from one brokerage how could they claim you sold the stocks at another? This is just nuts.
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Old 12-02-2017, 08:12 PM   #58
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EE savings bonds tax free for college will go away in 2018. Will go ahead and liquidate the remaining ones this month.
oops!! Wonder if I should give them to the kid now or on graduation? He's on track to owe up to 11k and thought that would make a nice pymt (he has no idea I have them & I have no idea how to tell him to redeem them -- guess that's 2 questions )
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Old 12-02-2017, 08:24 PM   #59
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If you sell from one brokerage how could they claim you sold the stocks at another? This is just nuts.
Interesting issue. If all shares spread across different accounts are considered for FIFO purposes, it can wreck the cost basis tracking done by brokerages.
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Old 12-02-2017, 08:32 PM   #60
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... EE savings bonds tax free for college will go away in 2018.
So much for best laid plans. Good reminder that laws could change for withdrawing from IRAs for example.
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