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7 Year-End Tax Planning Strategies for Executives

As we approach year-end, many executives and professionals will have the opportunity to make some financial decisions that can have a big impact.  Many of these decisions will have tax implications.  Here is a look at a few of these issues and seven strategies that can help. 

The strategies covered in this article: 

  1. Tax Loss Harvesting
  2. Exercising Options
  3. How to Handle Restricted Stock
  4. Tax Bracket Management
  5. Donating Appreciated Securities
  6. Bunching Charitable Donations and Using a Donor-Advised Fund
  7. College 529 Contributions & Gifting

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Company Stock in a 401k?  Consider Net Unrealized Appreciation (NUA)

When leaving a job for whatever reason, one of the biggest decisions you will face is what to do with your 401(k).  If your plan includes shares of your company's stock, NUA is something to consider during this process.

The Basics of NUA:

  • Net Unrealized Appreciation (NUA) can provide a significant tax break for those holding low-basis employer stock in their retirement plan.
  • There are strict rules that must be followed to take advantage of the NUA option.
  • NUA can provide an additional level of planning flexibility.

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Using an Exchange Fund to Diversify Concentrated Stock Risk

What is an exchange fund?

Exchange Funds or “Swap Funds,” are private placement limited partnerships or LLCs.  An Exchange Fund allows an investor to “exchange” an individual stock for shares in a fund of many pooled stocks. Here are some of the key benefits and drawbacks to an exchange fund:

Benefits:
  • Provide immediate diversification
  • Allow a larger investment amount to grow (stock owner avoids selling stock, paying taxes, and reinvesting lesser amount in diversified investments)
  • Potential increase in value if the Exchange Fund outperforms the original stock
  • May accept contributions for restricted securities

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Using an IRA QCD: Consider Giving Your IRA RMD to Charity

This post was originally published in February 2018 and has been updated to reflect 2019 tax law changes.

If you have reached 70.5 in age and have an IRA, you may benefit from donating all or a portion of your IRA required minimum distribution (RMD) to charity. By making a qualified charitable distribution (QCD), you may avoid tax on your RMD to the extent of the QCD.

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Tax Reform Highlights. What You Need to Know.

Voting along party lines, Congress has passed, and President Trump has now signed major tax legislation (“The Tax Cuts and Jobs Act” or “Act”). At an estimated cost of $1.5 trillion dollars, the legislation delivers deep and permanent tax cuts for corporations, as well as reductions to individual taxes.

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7 Strategies for Dealing With Your Concentrated Stock Position

This article was updated on April 10, 2019 to reflect current tax laws and limits.

There’s an old investment saying, “Concentrated wealth makes people wealthy, but diversified wealth keeps them wealthy.” One of the most common concentrations of wealth people have are large or concentrated stock holdings in a single company. Publicly traded companies often compensate employees with stock or stock options, especially upper-level executives. Others may have large holdings from investing early in an initial public offering (IPO) or inheriting a large holding. No matter how it was obtained, owning a large stock position creates investment and planning challenges.

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Tax Reform: Process, Policy and Personalities

In late September, the White House and Republican congressional leaders published their guiding principles for reforming the U.S. tax code. This “Unified Framework” provides general direction but is silent on many details. The debate over how to re-size and re-divide the national tax pie has begun.

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Charitable Giving Made Easy with Donor-Advised Funds

This article was originally posted in September 2017 and has been updated to reflect new data and the Tax Cuts and Jobs Act of 2017.

What is a Donor-Advised Fund?

Donor-advised funds (DAFs) go by many names.  They are called charitable gift funds, charitable funds, giving funds plus others.  For this article, I will refer to them by their legal definition, Donor-Advised Funds (DAFs).  A DAF is a fund maintained and operated by a sponsoring charitable organization which has legal control over the funds.

How Does a DAF Work?

  1. An individual, or donor, contributes cash or securities to a DAF account. Stocks and bonds are commonly used for funding.  Some DAFs may accept real estate, restricted stock, and non-publicly traded securities as well.  A minimum contribution is required and many of the larger DAF sponsors require minimums between $5,000 - $25,000. 

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You May Pay Less Tax in 2017

Like many politicians, President-elect Trump ran a campaign based on promises.  And politicians who win want to hit the ground running and enact campaign promises as soon as possible.  The first few months provide a newly elected official a honeymoon period to make changes.  The inauguration is quickly approaching on Friday, January 20th.  We are now left wondering and contemplating how those promises may turn into law and affect us in our lives, work and investments. 

Tax policy proposals are of particular interest.  Governments utilize taxes not only to pay for social programs and national defense but also to encourage and discourage behaviors.  So let’s highlight some tax changes that have been proposed and their possible effect.

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Thoughts on Historic Election Aftermath

We wanted to share with you some initial reactions to this watershed and historic U.S. presidential election.

Like many voters, U.S. and global financial markets are caught off guard and will react negatively to this surprise, having preferred and predicted a Hillary Clinton victory. As with most any external shock, investors are wise to stay calm and avoid making moves in what are likely to be volatile markets over the near term.

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