How do (did) you know you are a millionaire?

Parent Cafe
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<p>I know traders that do optimize for tax considerations. These are usually folks that can operate in a very narrow margin environment where they find a combination of investments that can make a decent return with relatively low risk but they usually have to hold the investment for a while.</p>

<p>In a perfect world, I’d take tax considerations into account but it adds a level of complexity that I don’t want to have to deal with. There are some that do benefit by considering tax effects.</p>

<p>Companies do it all the time. There are some $1 trillion in profits in US companies being held overseas waiting to be repatriated when tax rates improve.</p>

102

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Yes, I agree that tax rates (or the threat of changes) can effect when people cash out an investment.</p>

<p>But when he bought that house 20 years ago, did the tax rates (or threat of changes) influence him to make the investment in the first place? I highly doubt it.</p>

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What tax rates are you paying? I assume ordinary income rates for the interest, and capital gain rates on the appreciation… would you have not made this investment if the LTCG rates were 20% instead of 15%? or 25%?

This is pretty funny.</p>

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<p>September 2008: “Wow, the market’s looking a little shaky. But I’m up $300K this year, so if I can just hold off selling for another three months I’ll save $45K in taxes.”</p>

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<p>Another thing that is often stoo-pid is day trading. Can lose your shirt.</p>

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<p>We’ve never had to pay LTCG because we haven’t repatriated any of the money.</p>

<p>I should have separated the first and second sentences as they were separate thoughts. The first sentence was an academic sentence while the second was to explain what we did to answer a question about what we would do in a given circumstance. We have some options that others don’t have because of citizenship.</p>

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<p>Where is your citizenship, bc? Did you tell us Singapore?</p>

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<p>I’m a US citizen. My wife has Singapore citizenship and had residency in another country besides the US.</p>

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<p>How does she maintain residency in 2 countries?</p>

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<p>If they jack up the LT CG rate to 35% from 15%, you will see a lot of money shift from the stock market to other investments. I don’t really bother with having investments in multiple places around the world to hedge against the value of currencies, IMHO, it makes your financial life a nightmare.</p>

110

<p>jym - An Irish couple, friends, were working in this country when their children were born. The kids are Irish citizens because they are offspring of Irish parents, and American citizens because they were born here.</p>

<p>I imagine the two countries have different residency laws.</p>

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<p>I find that it’s remarkably calming.</p>

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Like what?</p>

<p>What other investments can you make that aren’t subject to LTCG rates if their value changes?</p>

113

<p>Newhope,
I think you are confusing citizenship with residency. My DH was born in Japan to US parents. He had dual CITIZENSHIP until age 18, at which time he had to choose (goodbye Japanese citizenship). RESIDENCY usually means you spend more than 180+ days/year in a country to maintain “permanent resident” status. I guess different countries have different rules-- maybe meeting that rule 3 yrs out of 5 or something (I am guessing) b/c otherwise one can’t spend more than half the time in 2 countries in any given year. If the rules are 180 days, must be careful to balance with only a few days to spare on either side.</p>

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<p>If you need income, you could go into divvy stocks and take the lower tax rate if LTCG > dividend rates and never sell the underlying assets.</p>

<p>I’ve seen some pretty cool things done with depletion credits in limited partnerships where you wind up paying no taxes on your gains.</p>

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<p>Municipal bonds are a possibility as they are exempt from federal taxes.</p>

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<p>jym - I was merely trying to suggest that just as countries have different criteria for citizenship, that they might also have different criteria for residency. I can’t cite a specific pair of countries where residency might be claimed in both. But it wouldn’t surprise me a bit if another person could do so. </p>

<p>Sorry for the confusion.</p>

117

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The income might be tax-exempt, but gains are not.</p>

<p>And I would still munis to be “investing”. The original statement was “the problem with raising the CG tax is that it will have the effect of stifling investment.”</p>

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<p>No worries, newhope. It was just that I am well aware of the dual citizenship stuff, given my DH’s experience. Not so sure about the dual residency part since countries all have their own rules to qualify. Heres what someone posted on yahoo about it ** oops nevermind-- cant link it apparently. You can go to yahoo answers and look up “dual residency” or something.</p>

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<p>I remember reading about the post 2010 increase to $5MM for estate taxes, how did I skim over the fact that it reverts again in 2013, so is everyone expecting them to bump the limit up again next time they need a budget bargaining chip?</p>

<p>A $1MM house, even in today’s down market, is happening in a lot of populated areas, yet that may be the same house Mom & Dad bought for under $100k in the 60s & 70s. That would be a huge amount of estate tax out there. A million dollars does not buy what it did when we were kids.</p>

120

<p>I thought stepped-up basis had always been the rule, except for the year when there was no estate tax, except even then when they extended it they gave people the option to use 2010 or 2011 rules and added some limited stepped-up basis even for 2010.</p>

<p>Or something. It never keeps still long enough to pin down.</p>