In 1966, the Beatles released “Revolver,” the second of their great mid-decade album trio, and George Harrison’s “Taxman” was the opening track. His angry anti-tax lyrics were well-founded. U.K. tax rates at that time were beyond confiscatory, and all upper-bracket citizens who could set up shop outside of Merry Old England were thinking about it.
We in the U.S., of course, currently are not in such dire tax straits, but taxes are an important consideration when we develop trading programs for our taxable clients. And, the big program, as usual, is the upcoming late-December/early-January program, so we’ve begun thinking about what might be leaving client portfolios and what the replacements might be. Regarding the sales, our modus operandi for taxable clients is to take losses in December and realize gains in early-January. What that means this time is that we’ll be able to offset a portion of 2024’s already-taken gains, and push the tax liability associated with this program’s gains-to-be taken off into the future.
Speaking of taxes, as you know, talk of significant reform was all over the 2024 campaign trail, but actually enacting many of those proposed changes will be a bit of a stretch. All that said, the really big upcoming tax issue has to do with legislation already on the books. More specifically, the 2017 tax cuts are set to expire next year, and, unbeknownst to many voters, the fate of those cuts was entirely in the voters’ hands. Now, given the November 5 outcome, extending the 2017 tax cuts beyond 2025 seems likely. Of course, that includes both personal rates and capital gains rates.
So, to repeat, the late-December/early-January trading programs are our largest of the year. For our taxable clients, the potential tax liability associated with those programs is a major consideration, therefore, we do all in our power to reduce and/or postpone the pain. Losses typically are realized in December of the current year, and gains typically are realized in January of the new year. The result in taxable portfolios is an additional layer of complexity, but one well worth the effort. George Harrison’s genuinely angry lyrics keep ringing in our ears.
That’s all for now. From all of us to all of you, a Very Happy Holiday Season.