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Joshua Mosshart

Mosshart Wealth Management

Five Tax-Smart Ideas for Managing Your Portfolio

Posted Sunday, July 20, 2008 (1 year 128 days ago.) Viewed 99 times.

Savvy investors have long realized that what their investments earn after taxes is what really counts. After factoring in federal income and capital gains taxes, the alternative minimum tax and potential state and local taxes, your investment returns in any given year may be reduced by 40% or more. Luckily, there are tools and tactics to help you manage taxes and your investments.

#1: Invest in Tax-Deferred and Tax-Free Accounts

Tax-deferred investments include company-sponsored retirement savings accounts such as traditional 401(k) and 403(b) plans, traditional individual retirement accounts (IRAs) and annuities. In some cases, contributions to these accounts may be made on a pretax basis or may be tax deductible. More important, investment earnings compound tax deferred until withdrawal, typically in retirement, when you may be in a lower tax bracket. Contributions to nonqualified annuities, Roth IRAs and Roth 401(k) savings plans are not deductible. Earnings that accumulate in Roth accounts can be withdrawn tax free if you have held the account for at least five years and meet the requirements for a qualified distribution. Unless certain criteria is met, Roth IRA owners must be 59 or older and have held the IRA for 5 years before tax-free withdrawals are permitted.

#2: Consider Investing in Municipal Bonds

Municipal bonds, or "munis" as they are frequently called, are bonds issued by state or local municipalities to fund public works projects such as new roads, stadiums, bridges or hospitals. A municipal bond can also be issued by legal entities such as a housing authority or a port authority. For this reason, municipals can be an excellent way to invest in the growth and development of your community.

In addition, because the interest earned on municipal bonds is exempt from federal income taxes and may be exempt from state and local taxes (if they are purchased by residents of the issuing municipality), munis have the potential to deliver higher returns on an after-tax basis than similar taxable corporate or government bonds. What this means is that although the interest paid on municipal bonds is typically a lower percentage than is paid on taxable bonds, because it is tax free, it is, in effect, not as low as it appears. A simple calculation known as the "taxable-equivalent yield" can be used when considering an investment in a municipal bond.

For instance, if your income tax rate is 35%, a municipal bond paying 5% interest is actually a better investment than a taxable bond paying interest at 7.7%. Thus, for investors in a high tax bracket, the benefits of using municipal bonds in a fixed-income portfolio can be significant. Municipal bonds are subject to availability and change in price. Subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rate rise. Interest income may be subject to the alternative minimum tax. Federally tax-free but other state and local taxes may apply.

#3: Manage Investments for Tax Efficiency

Tax-managed investment accounts are managed in ways that can help reduce their taxable distributions. Your investment manager can employ a combination of tactics, such as minimizing portfolio turnover, investing in stocks that do not pay dividends and selectively selling stocks that have become less attractive at a loss to counterbalance taxable gains elsewhere in the portfolio. In years when returns on the broader market are flat or negative, investors tend to become more aware of capital gains generated by portfolio turnover, since the resulting tax liability can offset any gain or exacerbate a negative return on the investment.

#4: Put Losses to Work

At times, you may be able to use losses in your investment portfolio to help offset realized gains. It's a good idea to evaluate your holdings periodically to assess whether an investment still offers the long-term potential you anticipated when you purchased it. Your realized losses in a given tax year must first be used to offset realized capital gains . If you have "leftover" losses, you can offset up to $3,000 against ordinary income. Any remainder can be carried forward to offset gains or income in future years.

#5: Keep Good Records

Keep records of purchases, sales, distributions and dividend reinvestments so that you can properly calculate the basis of shares you own and choose the most preferential tax treatment for shares you sell.

Keeping an eye on how taxes can affect your investments is one of the easiest ways to help enhance your returns over time. For more information about the tax aspects of investing, consult a qualified tax advisor.

Joshua D. Mosshart CHFC,CASL, CEA
Chartered Financial Consultant, Chartered Advisor for Senior Living, Certified Estate Advisor, President

Mosshart Wealth Management Group, www.Mosshartwealthmanagement.com Joshua D. Mosshart is principle and a registered representative with and offering securities and financial planning through Linsco/Private Ledger (LPL) Member FINRA/SIPC.

California Insurance # 0C90229

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Davis Jr.: The Repoman Can

Posted Friday, April 25, 2008 (1 year 214 days ago.) Viewed 89 times.

Sammy

Sammy Davis, Jr. was born in Harlem on December 8, 1925. He made his stage debut at the age of three performing with Holiday in Dixieland, a black vaudeville troupe featuring his father and helped by his de facto uncle, Will Mastin. Their show was dubbed "Silent Sam, the Dancing Midget." Davis proved to be phenomenally popular with audiences, enough so that the act was soon renamed Will Mastin's Gang Featuring Little Sammy. Soon thereafter, at the age of seven, Davis made his film debut in the legendary musical short "Rufus Jones for President," and later received tap-dancing lessons courtesy of the great Bill "Bojangles" Robinson. In 1941, the Mastin Gang opened for Tommy Dorsey at Detroit's Michigan Theater; there Davis first met Dorsey vocalist Frank Sinatra -- the beginning of a lifelong friendship. In 1959, Davis became a charter member of the Rat Pack, a loose confederation of Sinatra associates (also including Dean Martin, Peter Lawford and Joey Bishop) which began performing together at the Sands casino in Las Vegas.

Throughout his life Davis found himself in the middle of racial controversies. In 1943 he joined the U.S. Army, where he endured a constant battle with racism. His inclusion in the Rat Pack was perceived in many quarters as an egalitarian move; many black audiences felt he was simply a token -- the butt of subtly racist jokes -- and declared him a sell-out. In 1954, Davis made headlines when he lost his left eye in a near-fatal car crash while driving back to Los Angeles from Las Vegas. During his recovery in the hospital, he converted to Judaism, which was bruited about by the press. Davis continued treading on socially controversial ground by carrying on a series of interracial romances, most notably with actress Kim Novak, and with the Swedish actress May Britt, whom he married in 1960 (which even elicited death threats).

Recognized throughout much of his career as "the world's greatest living entertainer," Sammy Davis, Jr. was a remarkably popular and versatile performer equally adept at acting, singing, dancing and impersonations -- in short, a variety artist in the classic tradition. He was among the very first African-American talents to find favor with audiences on both sides of the color barrier, and remains a perennial icon of cool. Davis, a lifelong smoker, died of cancer on May 16, 1990.

Unfortunately, Davis failed miserably in one area: the ability to plan and manage his finances. Upon his passing, his third wife, Altovise, was forced to hold an auction in an effort to raise the $7 million in federal estate taxes he left behind. With the help of a fundraiser she sold literally every personal memento--from his tap shoes to his gold record award for the hit song "The Candy Man." The event was a success, but raised only $439,000, just a fraction of the massive tax bill. Within six months Altovise found herself facing bankruptcy but opted to settle with the government. All royalties from the Rat Packer's films, TV appearances, records and other memorabilia have been

going straight into IRS coffers since Davis' death. It certainly was not Sammy's goal to leave his wife with massive estate-tax debts, but like most Americans, he simply did not have a plan.

WHAT COULD HAVE BEEN DONE DIFFERENTLY?

Sammy Davis, Jr. could have certainly opted for a charity to own his assets after his death rather than owe the federal government any estate taxes. Had he not wanted to leave the estate to his heirs, at least he should have set up a family foundation or charitable trust to hold it. Charitable planning is a very popular option among the wealthy and could have preserved the many mementos of his performing life for the public to enjoy rather than for the bargain hunters to own. Indeed, Sammy should have been more responsible to his wife by ensuring that his estate was not going to be left in such a mess but would instead ensure a lifetime income for her. Charitable planning could have provided that security. In addition, even though Sammy was a heavy smoker, he certainly could have afforded life insurance to protect his wife and, possibly, to create a fund for paying the estate taxes. An insurance policy would certainly not have cost his estate anywhere near the $7 million it ended up spending due to poor planning.

Joshua D. Mosshart CHFC,CASL, CEA
Chartered Financial Consultant, Chartered Advisor for Senior Living, Certified Estate Advisor, President

California Insurance # 0C90229

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