Capital Gains Reform from the Financial Planning Perspective

Shanney-Saborsky, Regina
October 1997
Journal of Financial Planning;Oct97, Vol. 10 Issue 5, p28
Academic Journal
The article focuses on three substantive modifications of capital gains, while referencing the provisions of the Taxpayer Relief Act of 1997 of the U.S. While lower capital gains rates, the exclusion of gains on residences, and the rollover of gains for qualified small businesses are generally favorable, the interaction of these provisions with existing tax concepts requires consideration. Generally, for sales of long-term capital assets sold or exchanged after May 6, 1997, the maximum capital gains rate will be 20 percent, with taxpayers in the lowest 15-percent tax bracket benefiting with a special lower rate of 10 percent. There are several transition rules associated with the gain on sales of principal residences, including the fact that the new exclusion does not apply to home sales before May 7, 1997. Since the taxpayer retains the ability to defer capital gains, and any subsequent dispositions defined as sale or transfers not including gifts or other reorganizations, are taxed at a much lower rate, the financial planner can minimize taxes while maximizing value, if and when the taxpayer wishes to recognize gain.


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