Year-End Tax Planning in 2010

During the past year and a half stock prices have risen dramatically from their lows in March of 2009, and because of the decline in interest rates, bond values have increased substantially as well. Real estate values on the other hand have continued to decline in many areas.

Economic Growth and Tax Relief Reconciliation Act of 201 “sunsets” take effect for 2011 as currently scheduled, will cause non-corporate taxpayers to pay a rate as high as 39.6% on short term capital gains and ordinary income, up 4.6% from 2010 rates. The maximum rate on long term capital gains will increase from 15% to 20% (18% on assets held more than 5 years). Taxpayers should consider whether to sell assets with large gains before the end of 2010 to utilize available losses and/or to lock in the 15% maximum capital gains rate.

This brief overview of some important considerations associated with capital gains/losses is by no means comprehensive. Always seek the advice of a competent professional when making important taxation decisions.

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