<p>^ I was wondering if adding a person to the ownership of the house is possible and if this will result in some taxes for this person? What is you add an animal? Could they tax an animal?</p>
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Why? Do you think people who invest are instead going to put their dough in a money market making < 1% just because the tax rates went up?</p>
<p>The biggest effect on investors IMO would be in the timing of their transactions. Raising the rate will cause a big spike in near-term CG tax collections as investors take profits to lock in lower tax rates before the new rates take effect.</p>
<p>I’m pretty sure a gift keeps the giver’s basis. So if you’re gifted real estate, the cost basis is the lower of a) the current market value or b) the giver’s original cost. This is why some people gift appreciated real estate and stock to charity rather than realize the capital gains themselves.</p>
<p>Here’s for gifted stock:</p>
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<p><a href=“https://us.etrade.com/e/t/plan/taxcostbasis[/url]”>https://us.etrade.com/e/t/plan/taxcostbasis</a></p>
<p>Much better to inherit real estate and appreciated stock because the recipient gets the stepped up basis, at least in 2011 and 2012. In 2013 the Federal estate exemption reverts back to $1 million (from $5 million) and assets are inherited at the original owner’s cost.</p>
<p>You can only add someone to the deed of a house if that person is legally able to own property. That’s why minors and dogs/cats can’t own houses. Changing the deed might also require refinancing.</p>
<p>People are driven by economic incentives. When you raise the CG tax, you give people the incentive to not invest. It’s a simple as that.</p>
<p>re: CG tax rates. I’m old enough to recall when CG were taxed at ordinary income rates at a time when the top income tax rate was considerably higher than 35%. Yes, that did have a significant effect on people’s financial planning decisions. Now we have a 15% long-term rate on capital gains. That’s considerably lower than ordinary income rates for high-income Americans, and has unfortunately spawned a cottage industry in “How to pay LT CG rates on a significant portion of your income.” … For example, hedge fund managers paying 15% LT CG tax on short-term trading activities that would be taxed at ordinary income tax rates for you and me.</p>
<p>I don’t know what the optimal capital gain rate might be. It’s surely lower than ordinary income rates (and no, I won’t explain why) … but it’s certainly not zero either.</p>
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<p>[Term</a> Deposits in Australia - Compare Australian Term Deposit Rates](<a href=“http://australia.deposits.org/term-deposits.html]Term”>http://australia.deposits.org/term-deposits.html)</p>
<p>If you think that’s good, I heard that term deposits in Brazil are paying over 10%. Unfortunately my Portuguese isn’t that good.</p>
<p>^ So if LTCG rates go up, are you pulling all your money out of stocks and putting it into Australian CDs?</p>
<p>I have never made or not made an investment based on the tax rates in effect at the time. I maintain few people do. How can you? You can’t predict what tax rates will be in the future.</p>
<p>Is a hedge fund manager making a billion dollars a year going to get out of the business if he suddenly pays more taxes? I don’t think so.</p>
<p>Can someone give me a concrete example of how they will change their investments based on what the tax rates are?</p>
<p>If tax rates go up, managers are given the economic incentive to find more profitable avenues for their portfolio. So they look abroad. So yes, they might decide to put their money into other equity instruments abroad.</p>
<p>“I have never made or not made an investment based on the tax rates in effect at the time.”</p>
<p>I did, a couple times. I have two words to describe these efforts: Stu Pid. (Fortunately the amounts were small and my family forgave my mistake.)</p>
<p>haha Portuguese is very similar to Spanish (I’m Spanish btw)</p>
<p>Lots of people make investments based on tax rates. Just take a look at stocks. Just about everybody holds on to them for one year or longer in order to qualify for LT CG tax.</p>
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I don’t think it matters where you invest. If you are in the US, you still pay at US tax rates on the profits.
But they didn’t make the decision to buy the stock based on the fact that if they held it for a year they would pay less in tax.</p>
<p>“Just about everybody holds on to them for one year or longer in order to qualify for LT CG tax.”</p>
<p>And does their short-term trading in IRAs!</p>
<p>I don’t think you’re getting this. The lower LT tax is an incentive. They don’t base their decision on it, but it does tilt the scales in that general direction.</p>
<p>The concept is analogous to giving people tax credits/money for having children. It is an incentive designed for people to have more children.</p>
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<p>I do a lot of short-term trading and often close up all positions near the end of the year in short-term accounts so that I don’t have to deal with wash-sales. Profits can turn to losses while you’re waiting for LTCGs.</p>
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<p>But the tax rates on particular classes does matter for where you put your money. We’ve been in Australia for a long time and have done well with the much higher TD rates and the tremendous appreciation in the $AUS dollar over the long haul.</p>
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<p>I wouldn’t change my investments, but someone in my neighborhood did. He rushed to sell his house before the end of 2010 because he was convinced that Congress was going to raise the capital gains tax rate. His gain was above the $500K home sale exclusion, but I’m not sure he did the math to figure out what his marginal increase in taxes would have been. His real estate agent was all for this as well (naturally). So just the threat of an increase in capital gains taxes can change behavior, although not necessarily in a rational way.</p>
<p>You have expected rates of return for CDs and stocks. So stocks win based on favorable tax treatment and expected rate of return. A tax change could alter the expected rate of return such that CDs would provide the better risk-adjusted rate of return. So you switch from stocks to CDs.</p>
<p>“Profits can turn to losses while you’re waiting for LTCGs.”</p>
<p>Yes. And it isn’t good decision-making.</p>
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<p>I don’t care about tax rates on capital gains. If I have to pay taxes, it means that I’m making money trading and I focus mostly on that. I don’t really pay any attention to taxes. I suppose that it would be more efficient to do so but you can’t focus on everything.</p>
<p>We have money in Australia and other countries for various reasons. The US dollar has fallen one-third since 2001 and there’s always the risk that it could fall a lot more. Having money in other currencies is a hedge against a dollar collapse.</p>
<p>We could also potentially move there too.</p>
<p>“Can someone give me a concrete example of how they will change their investments based on what the tax rates are?”</p>
<p>Let’s invert the question: True/False … tax rates are the overriding consideration when making any investment.</p>