State Street Global Advisors’ White Paper Features Best Practices For Year-End Tax Planning
November 21 2011 - 12:40PM
Business Wire
State Street Global Advisors (SSgA), the asset management
business of State Street Corporation (NYSE: STT), today announced
the release of a new white paper titled, 2011 Year End Tax
Management: How to Add Value in a Volatile and Uncertain
Market. The report, which is available on SPDR® University
(www.spdru.com), details the year-end tax management strategies of
seasoned advisors, reveals how exchange traded funds (ETFs) provide
advisors and their clients with expanded opportunities to improve
tax efficiency, and explores the implications of the Tax Relief,
Unemployment Insurance Reauthorization, and Job Creation Act of
2010.
“There’s no question market volatility is creating new
challenges for advisors, however, it’s also presenting specific
opportunities for proactive tax management that will provide value
to clients,” said Anthony Rochte, senior managing director and head
of the North American Intermediary Business Group at State Street
Global Advisors. “The whitepaper features actionable advice,
delivered by three seasoned tax-aware advisors, is designed to help
advisors maximize their clients’ after tax returns and position
their portfolios for expected tax increases.”
Highlights from 2011 Year End Tax Management: How to Add Value
in a Volatile and Uncertain Market include:
- Evaluate loss carryovers and asset
allocation. The lifespan of capital loss carryovers can have
important implications on which accounts to liquidate first and
where to locate assets going forward. For example, if it appears a
client will be unable to use up all losses, an effective strategy –
assuming the investor holds both taxable and retirement accounts –
can be to shift bonds out of taxable accounts and replace them with
equities.
- Get a head start in managing
short-term gains. Short-term gains should be monitored closely
and matched up with short-term losses, as the taxes due on
short-term gains can erode total returns – especially for high
income clients in the top tax brackets. Capital loss carryovers are
also useful in negating short-term capital gains from a tax
standpoint.
- Bank current losses. While some
investors and advisors neglect tax loss harvesting in years when
investors have not registered significant gains, the strategy may
not be a waste of time. Harvested losses can offset capital gains
and up to $3,000 of net capital losses can be deducted from
ordinary income on a tax return. Net losses above that $3,000 can
be carried over to future years until they’ve been used up by
future portfolio gains. If income taxes and capital gains rates are
increased in the years ahead, as many expect, carryover losses will
be especially valuable.
- Accelerate gains. With many
investors and advisors expecting a possible capital gains tax rate
of 20% or more in the future, investors may want to take gains
today at the maximum rate of 15%. When evaluating the opportunity
to accelerate gains, it is important to keep in mind that the
“wash-sale” rule, which requires investors to wait 30 days before
repurchase, applies only to recognition of losses, not gains.
Therefore, investors can sell a security to recognize the gain and
immediately repurchase the security to reestablish the
position.
- Consider diversifying out of single
stock positions. The annual review provides advisors with a
great opportunity to talk with clients about concentrated stock
positions and over-exposure to a particular stock. While many may
be reluctant to sell the position and pay taxes, today’s volatile
markets provide a timely reminder of the benefits of a broadly
diversified portfolio.
- Using ETFs for year-end
planning. The broad array of low cost ETFs available makes
managing losses at year-end easier. For example, financial stocks
are ripe for tax loss harvesting this year. An investor with one or
more stock holdings in this sector could sell their position to
create losses and direct the proceeds into a financial sector ETF,
such as the Financial Select Sector SPDR (XLF), to maintain
diversified exposure to the sector. ETFs are also effective
replacements for harvesting losses in mutual funds.
The seasoned practitioners who share their strategies for
positioning client portfolios to take advantage of current
opportunities and prepare for future tax increases in the white
paper include Glenn Frank, Director of Investment Tax Strategy at
Lexington Wealth, Jonathan J. Oliver, a Managing Director Daintree
Advisors Management, and Steven B. Young, Chief Investment Officer
for the Asset Management Group Curian Capital, LLC.
Investment professionals can access a copy of 2011 Year End
Tax Management: How to Add Value in a Volatile and Uncertain
Market by registering as a financial professional at SPDR
University (www.spdru.com), an award-winning, free online
educational center.
About SPDR University
Brought to you by State Street’s family of SPDR ETFs, SPDR
University (SPDR U) is a free online education source built
exclusively for investment professionals. State Street created SPDR
U to meet investment advisors’ growing demand for quick “anywhere,
anytime” access to high-quality educational content. With tools and
information you can put into practice, SPDR U allows investment
professionals to earn CE credits on a variety of topics, including:
ETF education; portfolio strategies; up-to-date market analysis;
actionable investment ideas; and best practices for managing your
business. Learn more by going to www.spdru.com today.
About State Street Global Advisors
State Street Global Advisors (SSgA) is a global leader in asset
management. The firm is relied on by sophisticated investors
worldwide for its disciplined investment process, powerful global
investment platform and access to every major asset class,
capitalization range and style. SSgA is the asset management
business of State Street, one of the world’s leading providers of
financial services to institutional investors.
This information is general in nature and should not be
considered tax advice. Investors should consult with a qualified
tax consultant as to their particular situation.
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