In recognition of the varied needs of our clientele, we are equally proficient in the taxable bond market which includes corporate bonds, taxable municipal bonds, and government and agency securities.
These fixed income investments perform an important function in the retirement plans that we manage (IRA's, 401(k)'s, and Pension and Profit Sharing Plans) by furnishing a secure foundation for this critical area. Our strong customer relationships are proof of our performance.
Our financial consultants have years of experience in both up and down bond markets. This knowledge, combined with the direct contact our financial consultants have with our trading desk, serves to further ensure that you accomplish your investment objectives. As a client of Glen Rauch Securities our expertise is available to you every day.
Special Report
Lighten Your Losses
As most of you probably know, you can use up to $3,000 in losses to offset ordinary income. If you live in a high-tax state like New York, the tax savings can be 50% or more, which effectively cuts your losses in half. Moreover, if you’ve realized gains in the stock market during the year, you can offset those gains by realizing losses up to the full amount of the gains.
It’s possible to do all of this and still maintain the character of your stock portfolio. True, the law bans “wash” sales, meaning you can’t sell something at a loss and turn around and buy it back. You have to wait 30 days, with attendant market risk, before buying the same security. But there are a few strategies that provide the same result.
The most common is to buy an identical number of shares you wish to sell for tax purposes, wait 30 days, then sell the position. Under first-in, first-out (FIFO) accounting rules you’ve sold the shares you bought first, realized a tax loss and now hold an identical position. Note, however, that you’ll still have undergone a month of market risk when you doubled your position. This makes sense if you believe your stock will rise during the period. If you think it will fall, you should simply sell, wait 30 days, then buy it back.
Bond Swapping
Another technique for lowering your taxes involves your bond portfolio. Anyone who owns bonds that are trading below their amortized purchase price and who has capital gains or other income that could be partially, or fully, offset by a tax loss can benefit from tax swapping.
The traditional tax swap involves two steps: (1) selling a bond that is worth less than you paid for it and (2) simultaneously purchasing a bond with similar, but not identical, characteristics. By swapping, you have converted a “paper” loss into a real loss that can be used to offset taxable gain.
Capital losses from swap transactions are reflected on Schedule D of your tax return. If you have short-term or long-term capital gains, the losses from the swap transactions will offset these gains first-long-term losses will offset long-term gains, and short-term losses will offset short-term gains; net losses in either category will then offset gains in the other category. If the net result is an overall capital loss, the excess loss can be used to offset ordinary income dollar-for-dollar (up to a maximum of $3,000). If an investor has both net short-term and net long-term capital losses, the ordinary income is first offset by the short-term capital losses, then by the long-term losses. Excess capital losses can be carried forward indefinitely to reduce capital gains liability and ordinary income in future years.
For more information concerning these tax planning measures, please contact a financial consultant at Glen Rauch Securities, Inc. 800-654-4000.