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Fiscal Cliff

No fiscal cliff solution could mean increase in capital gains

Jeff Horwich Nov 16, 2012
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Fiscal Cliff

No fiscal cliff solution could mean increase in capital gains

Jeff Horwich Nov 16, 2012
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There’s cryptic news this morning from the White House: Officials are developing an alternative to the fiscal cliff package of steep tax hikes and spending cuts. Negotiations with Congressional leaders begin today.

Without a negotiated solution, capital gains taxes — our tax on investment income — will increase by two-thirds in 2013. No matter what happens, capital gains taxes will go up by 25 percent as part of paying for health care reform.

It’s been reported that George Lucas decided to sell his Lucasfilm to Disney a few weeks ago in order to lock in his capital gains.

“You’re seeing a lot of that kind of behavior,” says Chris Low, chief economist with FTN Financial. But, he continues, “There’s probably two reasons not to do it. First off, if you’re investing like most of us do in a retirement account, then chances are, it’s tax-protected anyway, and so none of this applies. If you’re investing outside of a tax-protected account, most stock advisers recommend not making decisions based on tax changes. One reason for that is, once we get to the end of the year, there’s no reason to sell anymore. There’ll be a pile of cash on the sidelines, and it probably comes back into the market pretty quickly.”

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