I read two articles recently from leading news organizations that seemed
primarily designed to incite unhappiness and resentment. As a result of
these and similar articles, I fear in the upcoming tax season that some
tax clients may need extra consolation for no good reason.
1) taxpayers required to take RMD's from IRA's based on a 12/31/2007
balance that is much higher than at present.
2) year-end capital gains distributions due to fund managers conducting
ordinary business in addition to meeting extraordinary withdrawal
In both cases, the thrust of the article was that somehow insult (tax)
was being added to injury (decline in market value), but I just don't
see it -- am I missing something?
In case (1), leaving aside the issue why someone in their late 70's or
80's would have significant exposure to the stock market in the first
place, my response is, so what? Just because they have a RMD doesn't
mean they have to spend it, they can turn right around and immediately
re-invest in the same security (in the rare event there was "loss", wash
sale rule would not apply, since basis was always zero). In fact,
wouldn't this be better anyway? Unlike stocks in a Trad. IRA, ordinary
investment in stocks will either be taxed in the future at favorable
capital gains rates or inherited at stepped up basis. Why not go for
it, and withdraw *more* than the RMD, up to the next tax bracket?
In case (2), I'd be *glad* some of my gains were locked in as the market
was descending. I'd offer to reimburse anyone for the additional tax
they paid (up to 100%) if they will give me the remainder of the capital
gains distribution they are being told to be unhappy about receiving.
- posted 11 years ago