Wall Street Secrets for Tax-Efficient Investing

When looking at a monthly brokerage statement, an investor’s eyes go straight to the bottom line—the account value. But there’s a catch. If you have big gains and decide to play it safe and take some of that money off the table, taxes will take a hefty chunk of those profits. Brokerage firms know how to handle such risk for their own accounts, hedging holdings, for example, to iron out volatility instead of incurring taxable capital gains. Savvy individual investors can use the same techniques to protect themselves. In this indispensable guide, Robert Gordon, a Wall Street veteran, shares the strategies of an insider to demonstrate how you can use the tax laws to your advantage. Written in plain English, this book explains federal and state tax considerations that investors need to know to make the most tax-efficient choices and to protect their portfolios. The emphasis is on practical application, aimed at guiding you to specific, accessible tax-saving goals without having to wrestle down the entire Internal Revenue Code. Thanks to the talents of Gordon and respected journalist Jan M. Rosen, this book is clearly organized along transactional lines, offering easy entry for busy readers and allowing investors to zero in on a powerful array of proven, tax-minimizing techniques and strategies. By the time you finish reading Wall Street Secrets for Tax-Efficient Investing, you will be on your way to reducing your tax bite to a nibble and enjoying the full benefit of your investment earnings.

Table of Contents viii List of Illustrations xv Preface xvi Overview 1 Part 1: Taxable Investments and Strategies for Protecting Their Value 1 Choosing your Investment Tools Carefully 13 2 The How and When of Harvesting Your Losses 27 3 Techniques for Utilizing your Losses 39 4 Smart Choices for Fixed-Income Holdings 47 5 Hedging to Avoid Capital Gains Tax 55 6 The Quest for Tax Efficiency in Mutual Funds 75 Part 2: Tax-Advantaged Investment Opportunities 7 Structuring Your Retirement Portfolio 95 8 Savvy Ways to Save for College 113 9 The Double Life of Life Insurance 129 Part 3: Special Situations 10 Making Prudent Elections 143 11 Managing Your Employee Stock Options 157 12 Avoiding Tax Traps for Closely Held Businesses 167 13 Planning for Often-Overlooked State Taxes 177 Part 4 Your Annual Opportunity 14 Year-End Planning Strategies 201 Appendix 1: Historical Tax Rates 217 Appendix 2: Key Points for Investors from the 2001 Tax Act 221 Notes 227 Glossary 229 Index 250