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Strategies & Market Trends : Value Investing

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To: Ken Ludwig who wrote (50159)	11/25/2012 11:31:52 AM
From: E_K_S	Read Replies (1) of 78748

OT - But could effect general Value investment decisions Wow Ken - I guess the States can make their own Tax rules and do not have to follow the Feds. When Michigan instituted a 4% State tax on ROTH withdraws did they also have a tax on the money converted from the IRA to the Roth? Luckily I now live in a state that has no State income tax but what would prevent any and all states imposing their own tax on any other income stream(s)? CA raised it's sales tax (they say the increase is only for 5 years). I guess certain states provide one time property tax "rebates" for companies that move their business operations to that state. So it's not out of the question. Could we get special state and/or federal tax treatment by buying certain "value" investments? This is a slippery slope and all states and even the Feds must be careful to limit their "special" tax treatments on specific investments. I thought we wanted to simplify the overall tax code. FWIW, as far as I know, the Feds only allow up to a $3K loss from either short and/or long term investment losses (net of all gains) to be used to reduce ordinary income and/or IRA to Roth conversion amounts. In the article I posted up thread, you can book capital losses and use those losses to reduce other capital gains. The article goes on and states you can then use the money from your sales to pay all or a portion of the IRA to Roth conversion tax. So there is no free lunch. What I am planning on doing since I keep both losses and gains in the portfolio is (1) after I sell some of my losers and buy them back after 31 days I generate (sometimes) a net after sale/buy gain, (2) Use my booked losses to reduce all of my capital gains to record a net $3K loss and (3) apply the $3K loss against a portion of the IRA to Roth conversion amount AND apply my extra net buy/sale cash to the calculated Roth conversion tax. I will then tweak this year's Roth conversion amount up to but not exceeding the next marginal threshold tax rate tier. I already ordered my 2012 Turbotax Premiere program to help me drill down to the specific calculation amount. I do not know how difficult it will be to accomplish that but it will be all for not if either the States and or the Feds change the taxing rules in the years ahead. Finally, for me the biggest benefit in the tax planning is as the rule now states, the beneficiaries of the Roth account(s) will not be subject to any Federal tax on the balance in the account(s) when transferred on my death. So if left to a grandchild, it could be a big help in paying for college tuition and when allowed to grow, a little gift could get quite big by the time the child enters college. EKS

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