Aster, Rolf
October 1994
Journal of Financial Planning;Oct94, Vol. 7 Issue 4, p168
Academic Journal
When should a high tax-bracket investor hold a short-term capital asset until it becomes a long-term asset in order to take advantage of the lower capital-gains tax? This article offers a formula for determining the break-even future selling price that renders an investor indifferent between recognizing short-term gain currently or long-term gain in the future. This capital budgeting approach takes into account the time value of money, dividends paid (if any), the investor's tax-rate spread between short- and long-term gain, and the time to make the tax payment on recognized gain.


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