Tax Strategies

KRD

Well-known member
With the sp finally heading up significantly and much more to gain, I was wondering if members on Sharetease are beginning to consider tax strategies to offset potentially large capital gains.

In the US we have both short-term (shares held less than a year) and long-term capital gains rates. We also have what’s called a Roth IRA which I’m kicking myself I didn’t consider years ago. Once investors begin unloading significant shares the tax man will be calling.

I hold over 80% of my shares in a tax deferred retirement account. Down the road I plan to withdraw a 6 figure amount to pay off a second home ( bought partially with CLVLY shares). That will be classified as income and come with a big tax hit. So to avoid that what I’ve done in the last 2 years is move about 20% of the retirement shares into a Roth IRA. The impact is you pay taxes (treated as income) on the value of those shares at the time they are converted but after a 5-year holding period 100% of the money can be taken out tax free. I moved shares to the Roth when the sp was at $12 and $20 so already they’ve increased a lot. In retrospect I should have done this years ago when the sp was really low. Frankly, I was just unaware of this strategy.

Would be very interested in hearing what others are doing proactively to minimize future taxes considering some of us will be looking at potentially 7-figure gains.
 

Alexius

Well-known member
@KRD Thanks for sharing your "endgame-plan". You seem to be well prepared for the taxman, at least as well as we all can be :)

Here in Switzerland, the tax system for stock gains is very... generous. Officially, there is no tax for stock gains but only for dividends (% depend on canton, amount etc.)
Capital gains from the sale of shares are tax-free as long as you are not classified as a professional trader by the tax authorities. This is a gray area, which is looked at by the tax authorities on a case-by-case basis. One must meet 5 criteria to have certainty that capital gains are tax free:

- minimum holding period > 6 month
- transaction volume / year smaller than 5x the overall portfolio value at beginning of the tax year
- necessity that capital gains do not replace missing/absent income for living expenses
- the investments are not leveraged or the taxable investment income from the securities (e.g. interest, dividends, etc.) is greater than the pro rata debt interest
- purchase and sale of derivates (especially options) is only used for hedging of own stock positions.

If at least one point is not met, the authorities assess the case separately. I am confident that I meet all the criteria, but I will certainly clarify everything again with a tax advisor when it gets to the hot phase.
 
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macgyver

Well-known member
In Australia you can get a 50% tax ‘discount’ on capital gains if you’ve held the stock for more than 12 months. If the gains put you in the highest income tax bracket (which for most of us it will) effectively you’ll pay 25% tax on capital gains in the bracket and above. You can offset this with contributions to your superannuation, of which are tax deductible and you can reduce your tax bill. There’s not many options concerning tax minimisation in Australia, though some of the more sophisticated investors here may know some handy tricks. I have wondered if it’s possible to take out loans against your holdings as collateral thereby reducing your potential tax bill, but I haven’t found any examples on the net concerning Australia.
 
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macgyver

Well-known member
@Watene That has been a topic of discussion around our dinner table. But ultimately it comes down to keeping the other half happy. While we would save a considerable amount all things going well, we couldn’t be sure she would be happy starting life in another country (besides Vietnam which we nearly did at one stage, my partner is Vietnamese). All options are on the table, but it looks unlikely at this stage. Tax: a small price to pay for contentment🤷🏽‍♂️
 
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Clinhope

Well-known member
@macgyver you're in NSW/VIC Mac?

A few people i know have moved from NSW to QLD and that would be a considerable way to save money, though not specifically tax. Amazing houses in good locations for half of what they'd be in NSW.

Otherwise all we've got tax-wise in Aus is the 12+ months CGT saving and limiting the annual payments to fall within a certain tax bracket. Been trying for the last few years to stay under the highest bracket.
 

macgyver

Well-known member
@Clinhope We’re in Melbourne town. I’d love to live in warmer climes, don’t mind Cairns at all! The missus likes warmer weather too, but we both got family here. You never know though: we were ready to move to Vietnam at the start of the pandemic to try our hand at running a restaurant for a few years, but that got canned due to Covid. Lost the deposit and all so not a great business experience but we were ready to move somewhere for a change at that time. When it comes to the crunch I guess we’ll see how greedy we really are, fush and chups might be closer than we think😆
 
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This is another very good subject. The U.K has ISA's, tax free except I can't transfer the holding to it:mad:. I tried to buy on the Frankfurt exchange but it isn't possible, so I'm told. When I sold some last year the funds were wired across, after much debate about the process. It was one situation where the covid situation has helped. At some I will sell and enjoy the fruits of patience but that elusive Tax issue is an interesting one, what to do ?
A while back I said to the better Half that I don't want to die with thousands in the bank, it has been earnt, risked and I'm going to try and make damn sure that it is spent accordingly :ROFLMAO:!
 

Johnny H

Well-known member
@KRD I have about 15,000 shares in my Roth IRA, but I'm 42. 18 more years until I can reap the benefits.

Ultimately, if my gains are large enough, I'm going to pay a specialist to take care of all of this, as the difference will be significant.
 
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KRD

Well-known member
@KRD I have about 15,000 shares in my Roth IRA, but I'm 42. 18 more years until I can reap the benefits.

Ultimately, if my gains are large enough, I'm going to pay a specialist to take care of all of this, as the difference will be significant.
I am sure your Roth IRA will be worth a fortune by the time you can tap it. I retired last year but am convinced mine will be quite substantial by 2025. Having a high six or seven figure amount of tax free funds will be awesome.
 

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