5 Tax Saving Ideas to Do Now!

By Mark Sprenger

 As Benjamin Franklin observed over 200 years ago, “In this world nothing can be said to be certain except death and taxes”

Taxes are not going to go away, and no matter which political party is in power they will likely change. These changes however, will not affect the tax laws and rates in effect for 2011. Here are five ideas to lower your 2011 tax bill.

1.      Maximize your allowable contributions to qualified retirement plans and individual retirement accounts (IRAs). 

Not only will you lower your taxable income, but you will be doing something far more important, saving for your retirement. If you are a participant in a 401k or 403b Plan, you can contribute up to $16,500 in 2011 or up to $22,000 if you are over age 50.  If you have an IRA and sufficient earned income, you can contribute up to $5,000 or up to $6,000 if you are over 50.

 2.      Sell securities worth less than what you paid for them before year end.

The resulting capital loss may be utilized to offset capital gains that you may have incurred from sales earlier in the year, including short-term capital gains for securities held less than a year, that are taxed at the higher ordinary income tax rates.  Note:  there are special “wash sale” rules that prevent you from selling securities at a loss to offset gains and then immediately buy the security back.  Should your capital losses exceed your capital gains, you get to deduct up to $3,000 ($1,500 if married filing separately) against your higher taxed ordinary income (from wages, self-employment, etc.) with any excess losses carried forward to 2012 and beyond to shelter future capital gains. 

 3.      Make charitable donations up to $100,000 directly out of your IRA.

If you own an IRA and have reached age 70 ½, you can make your charitable (the charity must be a public charity approved by the IRS) donations up to $100,000 directly out of your IRA.  Such Qualified Charitable Distributions (QCD) are federal income tax-free, meaning that you do not have to report the IRA distribution as taxable income. This deduction is not available on your Wisconsin income tax return.  In Wisconsin you must add the QCD back into your federal adjusted gross income and claim the charitable donation as an itemized deduction credit.

 4.      Defer income to 2012.

If you are a self employed, cash basis taxpayer or a sub-S corporation owner, you can defer taxable income until 2012 by waiting to send out invoices until very late in the year.  Note: it is not advisable to defer income if the next year’s tax rate may be higher (in 2013, absent Congressional action, the top two federal income tax rates will increase from 33% and 35% to 36% and 39.6%, respectively). 

5.      Increase your 2011 itemized deductions.

By making your mortgage payment due in early January in late December, by paying the additional Wisconsin income tax that you are likely to owe in April 2012 before year-end, by paying all your 2011 property taxes before year-end, and by moving charitable deductions that you would make in early 2012 to before year-end.  If you are temporarily short on cash, you can charge the charitable donation to a credit card as it will be deductible in the year charged, not when the credit card bill is paid in 2012.

These are a few actions that you can take to lower your 2011 tax bill and in today’s tough economic times, a few extra dollars in your pocket rather than the government’s can be a very desirable outcome.

Disclaimer: Before making any tax decisions, seek advice from a financial and tax advisor who will take into account your specific needs and circumstances and will carefully consider the risks and consequences associated with such decisions.

Does gold make “cents” for you?

By Holt-Smith Advisors’ Staff

There have been a number of people who have asked, “What’s with gold?” Most likely you, too, have read countless headlines on the Internet, in newspapers, and, of course, we’ve all seen the late night infomercials. So why is everyone talking about gold?

There are different roles that gold can play in an investor’s portfolio. Let’s discuss three primary reasons as they relate to the current economic environment: diversification, safe haven from geopolitical risk and a hedge against the U.S. dollar.

Gold makes a strong candidate for diversification as it has little correlation with many asset classes, particularly stocks. For example, the chart below shows the returns for the S&P 500 (red line) versus Gold (blue line) for the last 20 years. Historically, when equity prices increase, the price of gold has decreased. Likewise in a bear market, investors tend to invest more in gold with the theory that gold is a way to “store value”.

 Another reason an investor might allocate a portion of their portfolio to the precious metal is its protective measure against the growing uncertainty of the global economy. Currently the obvious headwinds include the European debt crisis, emerging markets’ battle with inflation resulting from their accelerated growth and the United States’ inability to develop a credible strategy to reduce the deficit and kick start the economy. If politicians and Europe continue to disappoint, gold will likely continue to be a place of safety as demand for “stability” increases.

Finally, gold is a hedge against a weakening U.S. dollar. Gold is considered a universal currency and its value has an inverse relationship to the dollar. In periods when the U.S. dollar has depreciated gold was the beneficiary. We witnessed this inverse relationship during the financial crisis in 2008 when the price of gold actually dropped 20%. Gold was hurt at that time as foreign investors flocked to the U.S. dollar for safety, pushing up the dollar’s value.

With that being said, following the yellow brick road does not guarantee you a safe passage. There are risks involved, including:

1. Gold’s value is not related to its limited functional utility – its uses in industrial applications or jewelry.
2. Gold does not provide any cash flow return. In fact, it “costs” to store it. You buy it, it sits, and you hope that you can sell it at the right time for the right price.
3. Gold is difficult for the average investor to sell because of the constraints of selling a physical asset. The recent introduction of the Gold ETF (Exchange Traded Fund) has helped.
4. Gold prices could be the latest bubble. Its bubble could pop quickly resulting in a fast, steep drop in price.
5. The rocky geopolitical climate may increase gold’s volatility.

Everyone is talking about gold. If you already own gold we would suggest you keep a close eye on Europe. If you do not currently own gold but are considering it, monitoring Washington may be your best signal as to when to purchase.

Disclaimer: This information is provided solely for educational purposes and contains the opinions of the author which are subject to change without notice. It is not, and should not be construed as, an offer, solicitation, recommendation, or endorsement of gold or any particular security, product or service. All information presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. Before making any investment decision, prospective investors should seek advice from their financial advisors, take into account their financial needs and circumstances, and carefully consider the risks associated with such investment decisions.

That New Car Smell?
by Christina Podoll

At a recent stop to fill my gas tank I noticed a young professional, in his early to mid 30s, driving a brand new BMW 7 series sedan.

My first thought was, “Wow!! Nice car… (sigh)Perhaps one day…” My next thought was, “I wonder how much that car costs,” immediately followed by “I wonder how much that car will cost him in total!?”

Having just gone through the process of purchasing a new car myself, coupled with the fact that I date a car salesman, my curiosity was peaked so I calculated the opportunity cost associated of owning a brand new BMW 760 Li.

My calculations are based on several personal assumptions and do not take into consideration any maintenance costs. However, I don’t believe any one of these negates the validity of my argument.  After consulting a local BMW dealership, many of the BMWs come with a maintenance package for the first 4 years/ 50,000 miles which includes engine oil service, inspections, wiper blade inserts, brake pads, brake discs, engine drive belts and brake fluid service. After the initial 4 years, basic maintenance for a 7 series BMW will cost $120 – $420 a year depending on what services are due that specific year.

 According to www.bmwusa.com a certified pre-owned BMW will be covered under warranty up to 6 years/100,000 miles, whichever comes first. This warranty includes engine, automatic/manual transmission, final-drive assembly, steering, hydraulic brake parts, anti-lock braking system, electrical, air conditioning/heating system, cooling system and fuel system. In addition all previously scheduled maintenance is brought up to date before it becomes certified.

According to Kelly Blue Book, our young professional can purchase a 2011 BMW 760Li for $140,000. Assuming the current annual interest rate of 2.99% for 5 years his monthly payment would be $2,514.99.

What if instead he purchased the same car, with the same options, minus the new car smell (3 years old). Then he could invest each month the difference in his monthly payments. A Certified Pre-Owned, 2008 BMW 760 Li is shown on Kelly Blue Book for $58,000. Assuming the current annual interest rate for a Certified Pre-Owned vehicle of 3.89% for 5 years his payment is now down to $1,065.28 a month. Investing the difference each month of $1,450, assuming a 6% annualized return by investing in a balanced portfolio of stocks and bonds, his portfolio would accumulate to $101,672 in five years. His car however, even if in excellent condition, is now estimated to be valued at only $28,000.

There is however a long term consideration to be made. This individual, in his 30s will need to purchase more vehicles before he hits retirement age. Let’s assume this individual continues to purchase a similarly priced used versus new car every five years for the next thirty years. He continues to invest the difference in payments of $1450 a month. Assuming a 6% annualized return for the next 30 years, investing $1,450.00 a month, his account is now valued at $1,463,830.

On the other hand, if he purchases a new $140,000 vehicle every five years for the next thirty years, not only will he sacrifice his $1.5 million savings, but he will also incur an estimated lifetime depreciation cost of $655,200.

As a general rule of thumb a car’s depreciation averages between 15 – 20% per year with the majority of the depreciation taking place in the first 3 years. Of course a new car owner feels the sting immediately as the largest loss occurs as soon as you drive the car off the lot. In other words you already have negative equity before you even park the car in your garage.

There are several unknown variables to consider when estimating the depreciation of a vehicle. The only time you will know the exact amount of the expense is when you actually trade or sell your car.

When it comes to your next vehicle purchase I encourage you to take a long hard look not only at the price tag but the additional opportunity cost associated with your decision. Remember, when purchasing a car you are buying a depreciating asset and have the potential to lose up to 78% in the first 5 years of ownership. Also consider the forfeited future portfolio value, based in my example, of $1,463,830. While we all love that new car smell, I think we can also agree that the smell of financial stability can be just as sweet.

Too Chicken to Vote?

by Noel Goeddel

Its proxy voting season! As a shareholder of a public corporation or a mutual fund, you have a right to vote your opinion on a myriad of corporate issues on at least an annual basis. If you can’t attend the shareholder meeting, you can still vote by filing your proxy. An often overwhelming amount of information is mailed or electronically delivered for you to review and most of the issues covered are basic, such as selection of an auditor, election of a board of directors, etc.

Many of you may not think twice about how to vote. Some of you delegate your voting power to your financial services professional. But, did you know that we, as investment professionals, consider proxy voting a “big deal” and view it as a serious responsibility?

When you delegate your voting power, reputable investment professionals have a duty to vote these statements in the best interest of their clients. This is not only required by the SEC under the Investment Advisers Act of 1940, Rule 206(4)-6, but in many cases, it is incorporated into your financial firm’s investment policies.

At Holt-Smith Advisors, we not only follow SEC guidelines but also adhere to the CFA Institute Code of Ethics and Standards of Professional Conduct. Regarding the voting of proxies, Standard III DUTIES TO CLIENTS, Section A. Loyalty, Prudence, and Care states:

“Proxy Voting Policies. The duty of loyalty, prudence, and care may apply in a number of situations facing the investment professional other than issues related directly to investing assets. Part of a member’s or candidate’s duty of loyalty includes voting proxies in an informed and responsible manner. Proxies have economic value to a client, and members and candidates must ensure that they properly safeguard and maximize this value. An investment manager, who fails to vote, casts a vote without considering the impact of the question, or votes blindly with management on non-routine governance issues may violate this standard. Voting of proxies is an integral part of the management of investments. Members and candidates should disclose to clients their proxy voting policies.”

–Standards of Practice Handbook, Tenth Edition, Pg. 72. CFA Institute.

As a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act, there have been two major changes mandated by the SEC. The first is a “Say on Pay” proposal which allows shareholders’ an advisory vote on executive compensation. This vote must occur at least once every three years beginning with the first annual shareholders’ meeting taking place on or after January 21, 2011. The second rule states that companies must also hold a “frequency” vote at least once every six years, allowing shareholders to vote on how often they would like to be presented with the “Say on Pay” vote. After considering the various factors, my colleagues and I decided to vote proxies for the annual option as it provides the best value for the shareholders.

Voting proxy statements is not the most glamorous part of being an investment advisor, but it is a critical duty we assume for our clients. This responsibility is equally important to the investor who votes their proxy statements themselves. I encourage you to carefully consider the issues and how you are voting. If you are unclear on choices you have, there are many websites available to assist you with the process. A simple Google search can help you find out more about proxy voting, the items being presented, and the election results. One site that I find interesting and easy to use is Manhattan Institute’s proxymonitor.org, which is a growing database of proxy information.

So, as we scoured this season’s proxy statements, we discovered a variety of interesting items have been proposed for shareholder input. My particular favorite was presented to McDonald’s by a shareholder (whom we won’t name) regarding the proper way to kill a chicken. Who says corporate governance is dull! Happy voting!

Target Date Funds – Really? As Simple as Picking a Date?    Part II

By Michael Wilson

Last week’s blog covered the background of Target Date Funds (TDFs).  Now let’s focus on some of the questions you should ask about investing in Target Date Funds.  Remember, even if your company changed your 401(k) or 403(b) allocation to a TDF, you can adjust your choices to better match your own investment goals, risk levels, or time horizon.

When deciding whether a Target Date Fund matches your goals, a few key questions are:

    1.   How aggressive is the Glide Path?

The Glide Path is the industry jargon for how quickly the risk of the fund is reduced as the target date approaches.  Just because the fund titles itself Target 2015 Fund doesn’t mean it will automatically have a more conservative, small weighting in stocks when the year 2015 rolls around.   Remember, there are no industry-wide rules or guidelines for how much equity, fixed income, or cash a TDF should carry.  

For many investors, the goal is to be conservatively invested as retirement nears so that unexpected stock market drops don’t derail their plans for retirement.   Some TDFs rapidly drop the aggressiveness of the fund as the target date nears; others do not dial down the risk until later, leaving the door open for unexpected valuation changes at the target date.   Another TDF manager may utilize their market outlook to adjust the overall riskiness of the fund despite the time horizon of the fund.  This can enhance returns but if the manager is wrong about the direction of the market, it can lead to surprising swings in value as well.

    2.   What happens to the fund after the Target Date or after I retire?

You won’t necessarily be forced to sell your fund even after the target date passes or you retire.  Some of the funds, especially the ones with the more aggressive allocation at the target date, continue to adjust the mix for many years, slowly dialing down the risk as you age.  Other funds never adjust the mix again after the target date.  This can be a concern as investing too conservatively while living another 20+ years past retirement can result in tight finances as you age.   Your purchasing power may be eroded by inflation unless your portfolio returns keep pace.

    3.   What are the fees of the Target Date Fund?

Managers of TDFs are not subject to ERISA’s Fiduciary Standard (see our earlier blog on this subject 02/16/11) despite being offered in an ERISA covered plan.  Some TDFs have potential conflicts of interest because of how the TDF is structured—they combine a number of their company’s existing mutual funds in allocating across asset classes and styles.   There has been criticism of stacking fees, as each individual fund charges a management fee and there is a TDF oversight fee as well.   For example, the fictitious Acme Target Fund 2030 may charge 1.0% for each of the underlying Acme Stock funds, Acme Bond funds, etc. and then adds another 0.50%-1.00% for managing the mix, bringing the total fees into the 1.50% to 2.0% range.  This is before adding in the administration costs charged by the plan administrator.  This type of fee structure has come under increased scrutiny by Congress, the SEC and plan participants, encouraging TDFs to adjust their fees. 

    4.   Is the TDF appropriately diversified?

Within the stock allocation some TDFs invest in lower risk Blue Chip large company stocks, while others add more or less to international, midcap, or small company exposures.   Within the bond or fixed income allocation, funds utilize high yield bonds, foreign corporate bonds, or mortgage backed securities to varying degrees.  All of these choices affect the total risk or variability of the fund returns and the true aggressive or conservative nature of the fund beyond just the date in the fund name.

    5.   Does the TDF fit your comfort level or investment risk tolerance?

Just because you are planning on retirement at Year X, doesn’t mean you have to own a fund with that year in the title.  You, or a spouse, may have other assets set aside for retirement that affect the mix you want in your company sponsored retirement plan.  You may find the mixes of your plan’s target funds are too aggressive or conservative and a shorter or longer dated fund is more appropriate.   Coming up with an investment mix that best fits you isn’t always an easy exercise.

The goal of Target Date Funds is to provide an easy “one-stop” investment decision for the average investor.  In practice, the funds offer a widely diverse range of allocations and risk levels even within the same target year depending on the fund family.  Your specific target may be very different from a TDF’s.  However, TDFs do have merit as they help gain exposure to a diverse portfolio, especially for novice investors. The more you know and understand about your Target Date Fund alternatives, the smoother your glide path to retirement will be.

Target Date Funds – Really? As Simple as Picking a Date?   Part I

By Michael Wilson

Target Date Funds (TDF) or Life Cycle Funds jumped in popularity after the passage of the Pension Reform Act of 2006. The Act allowed automatic enrollment of employees into employer sponsored 401(k) plans and also allowed plan administrators to offer investment advice to participants. Target Date Funds instantly became the go-to option for plan administrators as they offered a simple solution for asset allocation.

Many firms recently changed participants 401 (k) allocations to a Target Date Fund based on the age of the employee. Employees are allowed to change their allocation to something different, but once again it then falls on the participant’s shoulders to research and determine if the Target Date Fund they are in matches their objectives and risk tolerance. These changes came to my attention after it happened to my dad’s 401 (k). He asked me to look at the TDF they selected to see if it made sense for him. What I found after looking into the TDFs is that there is a wide range of interpretation regarding the appropriate level of risk acceptable for a specific target retirement date. One fund family’s version may not be acceptable to every fund holder. It is difficult to find a one size fits all allocation based solely on the age of the participant as every person’s situation and retirement needs are different.

Target Date Funds usually have a date in the title, a fictitious example would be Acme Target 2025 Fund. The date in the fund title is supposed to represent the year in which the owner expects to retire, in this case the year 2025. The funds follow what is called a glide path to retirement, dialing down the risk of the portfolio as retirement approaches. The risk level is typically managed by adjusting the mix of stocks relative to bonds and cash, i.e. reducing the stock exposure and raising the bond holdings as time passes and retirement nears. The idea is that this will help keep investors from making big allocation errors leading to losing a lot of the account just prior to needing it at retirement and also from being too conservative early in their career and not having enough for retirement. Makes sense right?

However, after the market collapse of 2008, TDFs came under scrutiny because of the relatively poor performance of some funds with a 2010 target date. The more time until retirement, or longer out the date in the fund title, the more stock the fund holds, conversely, near term dated funds should be the most conservative as retirement looms. Morningstar noted that the equity exposure, usually the most volatile or risky asset in the fund, ranged from 26% to 67% of Target 2010 funds. Obviously this is a huge difference in risk or volatility potential for a fund that is supposedly designed for individuals retiring in the very near future.

Some of the difference can be explained by whether or not the fund considers itself as managing to the retirement date or through the retirement date. The through retirement date funds consider that the holder may live another 20+ years and they leave a little more equity exposure in the fund at retirement and continue to move toward bonds after the Target Date. Others stop changing the mix at the Target Date and are already at their most conservative setting. The problem is this philosophy isn’t readily discernible in the fund title or description, again leaving it up to the investor to figure out if the mix is appropriate.

In summary, although TDFs are designed to help novice investors set an allocation for their retirement nest egg the actual practice of them varies so much in allocation that investors still need to know what mix is appropriate for themselves and can’t just rely on the date in the title.

Look for next week’s post where I’ll discuss what questions to ask yourself when determining whether or not a TDF fund is right for you.

5 Reasons to Ditch Your Old 401K

by Ryan Erickson

The other day while checking my LinkedIn page, a note popped up saying that 14 of my 140 contacts had changed jobs within the last year. The note made me instantly wonder if they were making the right decisions about 401k plans (or 403Bs for non-profit or government employees) from their previous employers. A job change should always prompt a review of the retirement plan from the past employer, and in most cases spur a move to a rollover IRA.

One important reason to roll to an IRA is to have more investment choices. Even the best 401k plans have very limited investment choices. By rolling the money to an IRA, the owner will have the flexibility to invest in any product available to IRA accounts, not the limited supply of typical mutual funds available in the old company 401k program. The IRA owner can choose to manage their own investments or can hire an investment expert to design and build a portfolio tailored to their situation.

There may be estate planning implications within the old 401k. Most 401k programs require the heirs to take assets after the account holder passes away. IRA’s, on the other hand, maximize the changes that the account holders heirs are allowed to take distributions over their lifetime. Beneficiaries could do a transfer after the account holder dies, but rollovers are easier and more simple to complete while the account holder is living.

Another reason to roll the old 401k is it will make future required minimum distributions (RMDs) easier. With IRAs, your RMD is calculated on the combined total of all IRA accounts held by the account owner. If, instead, the account owner holds multiple 401k accounts, or even one, the RMD must be calculated individually on any 401k accounts. Instead of taking one sum from a particular IRA to cover the entire annual IRA withdrawal, a specific amount must be taken from each 401k, separate from any IRA withdrawal.

Additional flexibility is gained with a rollover. With an IRA, the account owner can withdraw money whenever needed. The typical 401k limits the frequency of withdrawals, and others set all or nothing restrictions. Although early distributions from any retirement plans are usually not a good choice, access to the cash is under the control of the account owner in an IRA, permission to withdrawal is not needed from any Human Resources department.

The final reason, and possibly the most important as far as long term success is concerned, is cost. It is usually very difficult for the average investor to determine the costs associated with investment management. Mutual fund fees are never shown as a dollar amount and are quickly whisked out of the investment return. By rolling to an IRA, the owner can hire a manager that explicitly shows management fees, or at least choose low fee investments such as Exchange Traded Funds or index funds to lower costs. Studies show the average mutual fund investor’s returns are better with low cost alternatives.

As with everything, one size does not fit all. There are a few cases in which a rollover may not make sense. The main being the potential protection a 401k plan may offer the owner over an IRA in the event of a civil lawsuit. A call to a trusted investment advisor can help the owner consider all options and in many cases, get those old accounts “rolling.”

SEC Recommends Uniform Fiduciary Standard – What Does This Mean for Investors?

by Mark Sprenger

One of the most intensely lobbied provisions of the major financial reform legislation enacted last Summer was the standard of care that should be applicable to brokers and investment advisors when providing advice to investors. Unable to reach agreement, lawmakers merely kicked the issue down the road and the Dodd-Frank Wall Street Reform Act simply commissioned a six month study by the Securities & Exchange Commission (SEC) on the effectiveness of existing legal and regulatory standards for broker-dealers and investment advisors. Six months later at the end of January, the SEC issued its Report calling for the adoption of a uniform fiduciary standard of care for broker – dealers and investment advisors.

What does this Report recommendation actually mean you might ask? First, as one would expect, the SEC Report noted that most individual investors receiving investment advice from brokers and investment advisors expected such advice to be in their “best interests”. Second, and more revealing, the Report confirmed that most investors were not aware that brokers and registered investment advisors are currently subject to completely different standards of care when providing personalized investment advice.

Under current law, registered investment advisors (like Holt-Smith Advisors) are subject to a much higher fiduciary standard of care. As a fiduciary, their investment advice and recommendations are required to be in the “best interests” of their clients. Brokers, on the other hand, are subject to a much lower standard of care. Broker-dealers, under most circumstances, are not subject to a fiduciary standard of care and are simply required to “deal fairly” with their clients. The broker’s duty of fair dealing only imposes a “suitability obligation” which generally requires that broker’s investment advice and recommendations merely be “consistent with the interests” of their clients.

When it comes to investor protection, “consistent with the interests” is a far cry from “best interests.” Based on the belief that investors should be uniformly protected when receiving personalized investment advice regardless of whether they have chosen to work with a registered investment advisor or a broker-dealer, the SEC Report recommended the adoption of a uniform fiduciary standard of care(no less stringent than that currently being applied to registered investment advisors).

While the application of higher uniform standard of care may seem logical and appropriate to most people; unfortunately, the Report’s recommendation is only the first step. Dodd-Frank authorizes – but does not require – the SEC to put forth Rules with respect to the Report’s recommendations. In the face of Republican opposition and anticipated intensive lobbying by the brokerage industry over the substance of any Rules put forth, the outcome is uncertain. Stay tuned, with Government, you never know what will happen next.

Alert: IRS has your numbers!

by Eva Šolcová Smith

As you may have heard, there are changes in how the cost basis for your capital gains will be reported to the IRS. On October 3, 2008, Congress passed new legislation called the Emergency Economic Stabilization Act. This piece of legislation requires your custodian or broker to report more information about your trading activities throughout the year. It will be reported on the form 1099B with the first one reflecting the changes filed in 2012 for the trades that happened in 2011. Previously, brokers and custodians reported only gross sales proceeds without any further details. While in the past you provided details about your capital gains to the IRS yourself, starting January 1, 2011 your custodian or broker will do it as well. So now, the IRS will have complete records to double check your capital gains.

If you are like most investors, you probably purchased shares of the same security at various times which created multiple cost basis lots. The IRS selected a default method for selling multiple lots securities. It’s called First In First Out or FIFO. It sells the lots that you purchased first without any sonsideration of your tax efficiency. Also, it would be good to point out here, that your custodian or broker is not required to watch out for you, ensuring that your trades are reflecting your tax needs. They are just required to report it. If FIFO doesn’t work for you, you can change it. But you must be proactive, changing the custodian’s system BEFORE your transaction settles.

Our client’s don’t need to worry about any of these changes because:

1. We have always kept track of our clients’ cost basis information in detail on our in-house system.
   
   
2. As we sell a security for clients, we choose the tax lot that will minimize their tax situation.
   
   
3. Since the new legislation was finalized, we have arranged with custodians to provide the most flexible tax accounting method to benefit our clients.

Our clients have their cost basis choices under control. If you don’t and would like to learn more about the regulation or what we can do for you, give us a call or email us. We will be happy to answer your questions.