Good-Bye Tax Shangri-La?

In this election year competing visions of tax reform is center stage front page news. Mark Blumenthal, partner and chairman of the Family Office Service Group at Blackman Kallick Plante Moran discussed at this 2012 Financial Executives Forum session why this year may be a once-in-a-lifetime tax planning opportunity for both businesses and wealthy investors and provided insights into the tax implications for investments, gifting opportunities, and business structures in light of next year’s scheduled changes in the tax laws.

• Consider that taxes are a drag on investment returns in your strategic planning
• Both dividend and capital gain rates sunset at the end of 2012
• May want to move dividends out of C-Corporations now to get 15% rate
• Sell public stock to lock in gain – no wash sale rule in reverse
• It may be a good time to sell private assets
• It is wise to do your gifting before the end of 2012
• Going forward some tax rates likely to go up but others will go down
  - Corporate rates are likely to be lower than individual rates
  - Mortgage interest deductions on second home is likely gone or will at least be reduced
  - State and local property deductions will likely be eliminated
  - Charitable contributions will likely remain in place
• Multiyear planning is essential to avoid the Alternative Minimum Tax (capital gains and homes can push you into AMT territory)