dsmWealth November 7, 2019

Joe Kristan, a partner in the accounting firm Eide Bailly, advises high net worth clients to plan for fiscal uncertainty.

Tax Planning for This Year and Beyond
BY STEVE DINNEN

As a long-practicing tax professional in Des Moines, Joe Kristan has a keen eye focused on tax strategies for 2019. But he can multitask, and is doing so with his other eye on the national elections of 2020 and what might ensue by way of more tax code changes.

Kristan, a partner in accounting firm Eide Bailly LLP, is hedging his bet that, if Democrats win the White House next year, they will alter the income tax landscape. Some candidates already have spoken about an extra tax on super-high income earners, and any expansion of Medicare likely will result in an expansion of taxes.

"A lot of [work] for high net worth individuals is planning for uncertainty," he says.

Estate tax deductions also could change. If and when they fall from their current level ($11.5 million), Kristan says high net worth individuals may want to revisit their charitable giving plans now in order to shed some assets that might otherwise end up in government coffers.

High net worth individuals often are that way because they own a business. It will typically be structured as a
C Corporation or an S Corporation. Though Congress dramatically cut the tax bill on C Corporations, converting to one will still leave you with an extra tax from dividend payouts. Changing your mind to reconvert to an S Corp will be difficult.

Lest we totally forget 2019 planning, here are pointers that apply for this and any other year:

Max out your Healthcare Savings Account contribution. That way you and your spouse can shield up to $7,000 ($8,000 if over 55) of income earmarked for it, and there is no salary cap to participate.
If you’re mulling whether to sell a mutual fund, do so before it makes its year-end dividend and capital gains distributions (typically in December; it varies by company). Otherwise, you’ll be taxed on them. (Conversely, if you’re buying, wait until at least a day after those tax events occur.)
On the securities side of investing, stack up any money losers for the year against what you have made profits on. If you have already banked some trading profits, you can offset them by selling some losers before the end of the year.
If you have to take a Required Minimum Distribution from your IRA, but don’t need the money, consider donating it directly to a charity. That will satisfy your RMD requirement, cut your tax bill and cement your reputation as a decent human being.

Stock Investment Plan Influences Gifts to Foundations
BY STEVE DINNEN

A robust stock market continues to play an important role in charitable giving.

In 2018, the latest full year for which data is available, the Community Foundation of Greater Des Moines reported that it received $63.7 million from donors. Approximately $18.47 million of that was comprised of marketable securities.

Results from 2017 and 2016 show that even more securities went into Foundation coffers--$25.6 million worth in 2017 and $22.5 million in the prior year.

Gifts to the Foundation, which serves as a conduit for charitable donations to hundreds of non-profit agencies throughout central Iowa, is comprised of cash, securities and non-cash assets (such as real estate, farm crops, or even an ongoing business).

Securities donations carry a bonus because of the value appreciation that typically lies behind them. Say you bought Wal-Mart Stores Inc. way back when, when it was worth $10,000. Now it’s worth $200,000.

If you sell that stock, you’ll owe capital gains taxes on the $190,000 profit. But if you give it away, there not only is no tax, but you get a deduction for the current value of $200,000.

This works for any appreciated asset – such as land. But it’s most commonly found with stocks, especially those with a low cost basis.

Warren Wealth Tax: Bezos Would Pay Over $6 Billion a Year

BY ROBERT FRANK for CNBC Wealth

The presidential primaries are still months away, but Sen. Elizabeth Warren has already doubled her wealth tax. As part of her plan to pay for "Medicare for All," Warren would double the top rate of her wealth tax to 6% from 3%.

That would mean Jeff Bezos would pay more than $6.5 billion in wealth taxes this year alone. Not to mention the other new taxes Warren plans for the rich, which includes taxing capital gains at the same marginal tax rate as ordinary income, which means that if Bezos sells Amazon stock – as he does every year to fund Blue Origin – he would pay a tax rate of 37% on the stock. Previously, the rate was 23.8%.

But another less-publicized feature of Warren’s health-care tax could be even larger. >> READ MORE

Wealth Gap Among Retirees Rises Despite Growing Economy

BY MARK MILLERBETH, Reuters

The current record-high level of income inequality in the United States affects all segments of society, but two new reports shed light on how the trend is impacting older Americans.

The disturbing finding of both studies: Inequality has reached shocking levels among today’s older adults, and the gap will be much wider for young people when they reach retirement age.

The U.S. economy has been growing for 10 straight years, and median incomes are rising. But income inequality is at a 50-year high, according to a report released by the U.S. Census Bureau last month. A widely used measure of inequality — the Gini coefficient — shows the United States has the highest level of inequality among the largest industrial nations. >> READ MORE

10 Most Common Financial Leaks Impairing Flow of Wealth

FROM MONEY MAGAZINE

Most of the initial stages on the road to wealth involve making sure that you’re moving forward, not slipping backward.

Unfortunately, many of us are too consumed by day-to-day life to focus on the countless instances of small-scale back-sliding: completely unnecessary waste, extra money we could have if we just reached for it, fees we could avoid if we just made a little effort. The stupid easy stuff, in other words.

What follows is a list of 10 common financial leaks — by no means an exhaustive list, but a good starting point — and strategies for plugging them. >> READ MORE

CNBC says one luxury tour 'May Be the Most Epic Ski Trip Ever Created'

Financial Times reports, 'Rich Millennials Push Family Wealth into Impact Investments'
Science Daily: 'Wealth Can Lead to More Satisfying Life if viewed as a Sign of Success vs. Happiness'

dsmWealth is published on the first and third Thursday of each month and updated on dsmMagazine.com.

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