Conference nyoss1::market_investing

    Re: Instead of using individual basis for each stock sale, instead
    you would use an average cost basis
    
    Great, another tax arithmetic nightmare :-(
    

  I also read that the capital gains tax rate is higher in Clinton's plan -- 
another "tax the rich" scheme.  The Clinton/Congress budget/tax cut war 
should be heating up very soon.

				SQ

> I also read that the capital gains tax rate is higher in Clinton's plan ...

	Can you be more specific where you read this, and what type of
	cap. gains the article was refering to (ie. short and/or long
	term).

	Is the proposal available from the White House home page?

>> I also read that the capital gains tax rate is higher in Clinton's plan ...
>
>	Can you be more specific where you read this, and what type of
>	cap. gains the article was refering to (ie. short and/or long
>	term).

I wish I could be a lot more specific.  I read this in the local newspaper 
and it was the most useless article on the budget I've seen to date -- 
absolutely no details.  The main point of the article seemed to be that 
Clinton plans to use his proposal for a tax increase on capital gains as
leaverage in the budget talks.  Nothing's definite yet.

>	Is the proposal available from the White House home page?

The only thing I found was a very general speech about the budget by both 
Clinton and Gore.  It doesn't mention capital gains.  Details seem to be 
very hard to come by.

				SQ

Summarizing from the article, the change:

  is estimated to bring in an additional $4.7 billion in tax
  revenue between 1997 and 2002.

  is presented as closing a loophole that allows more savvy (often
  wealthier) investors to minimize their capital gains taxes.

  prevents less savvy (often less well-off) investors from winding
  up paying more in capital gains taxes than the savvy investors.

Rather than paraphrase, here is how the Chronicle explains it:

  The proposed changes would force investors to average their stock 
  investments in a particular asset for tax purposes, administration 
  officials said, instead of having the option of the "share 
  identification" or "specific share" system. 

  Under that system, investors who have bought stock shares at various 
  prices can identify on which block they want to pay taxes when they sell 
  part of their investment. That way, they can minimize taxes.

  So, for instance, the investor who bought an equal number of shares of a 
  fictitious XYZ Corp. at $25 and $75 as the price was rising would 
  identify the $75 shares as the ones on which he would pay taxes, because 
  he would show the smallest capital gain and have the least capital gains 
  tax.
 
  By the same token, administration officials say less-experienced 
  investors might choose the "first in, first out" method or a similar 
  method that would cost them far more by calculating the tax based on the 
  first shares they bought. In the XYZ example, those would be the $25 
  shares, the ones with the highest capital gain and the highest tax. 
  Under the proposed change, all share purchases would be averaged. In the 
  example, the stock price would be calculated for tax purposes as the 
  average of the price of the two equal purchases -- $50 a share -- as is 
  presently done with mutual funds.

  .... [Editorial note: I'm omitting all quotes of officials here]
 
  The proposal also attempts to restrict so-called "short-against-the-box" 
  transactions. Those occur when investors "short" the stock, meaning they 
  pledge to buy shares at a future date, in anticipation of a price 
  decline.
 
  By shorting the common stock after having bought shares as they rose in 
  price, savvy investors can delay having to pay capital gains until it is 
  more advantageous, officials said.

    Those savvy investors are just the scum of the earth, aren't they?
    
    When the Administration also proposes that capital gains taxes should be
    indexed for inflation - then I'll agree that their averaging scheme
    is acceptable.
    
    Vote 'em out - with what as a replacement though - that's the real
    problem.

    
    Re .5 - Thanks for the info. 
    
    Looks like most of us who own DEC stock get hurt by this change.
    We often own shares bought at different prices. If Clinton's
    plan becomes law, sellling DEC shares may become a lot more
    complicated for us as we'll have to constantly track our average
    purchase price. Even selling the day we buy (which many of us do)
    becomes a pain if we happen to have any other stock we have not sold.
    
    Typical Clinton 'though....proposes a change claiming he's going
    after the savvy investor who is "taking advantage of the system".
    I reality getting us grunts....
    
    					Ed
    
    

> Typical Clinton 'though....proposes a change claiming he's going
> after the savvy investor who is "taking advantage of the system".
> I reality getting us grunts....

	I'm still holding judgement until til I see the full details.
	However ...

	The 1st loophole with those indefinitly postponing gains by
	selling short against the box most definitly needed closing.

	The 2nd one however I don't consider a loophole; choosing
	which individual shares one sells does not give one a way
	to indefinitly postpone gains (except by never selling shares
	on which one has paper gains, but thats different).

	I'd be really surprised if the forcing average cost method
	to be used proposal, based on the sparse info we know about
	the proposal, is likely to make it very far in the legislative
	process....

This is still rather early in the lawmaking process. Remember, Clinton is in the
Southern political tradition. He always leaves himself negotiating room when he
makes a new proposal. In your personal lobbying mail to the White House & your
Congressional representative, say what you just said:

    Sure, do away with "shorting against the box" (which is indeed a trick
    not much used by "ordinary folk") but...

    Leave intact the current option of specifying shares OR using average
    share price to calculate gain (or loss) on stock sales.

If we don't speak up, whatever passes becomes our own fault, right?

B. D. Huval