“Any time you make a decision
purely for tax reasons, it has a way of coming back and biting you.”
It’s no secret that the looming
“fiscal cliff” has investors sitting on the edge of their seats. And if the
President and Congress cannot agree on a plan to avert automatic tax increases
set for December 31, some of those investors may be tempted to act soon to take
advantage of current tax rates.
But financial advisers warn that
“any time you make a decision purely for tax reasons, it has a way of coming
back and biting you.”
A recent article in the New York Times, “With Shifts Possible in U.S. Tax Policy,
Beware of Sudden Moves,” discusses some of the top areas where
short-term trading decisions based solely on taxes could end up hindering
long-term investment goals. The article focuses on how to deal with appreciated
stock, municipal bonds, real estate and insurance annuities.
The best advice offered by the article, however, is to wait
and see. Restraint now could prevent a lot of regret in the future.
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References: The New York Times (December 2, 2012) “With Shifts Possible in U.S. Tax Policy,
Beware of Sudden Moves”