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a family member of mine makes about 350k in compensation and will make about another 70k in capital gains from him playing in the stock market. What kind of advice would you give to minimize his tax burden, especially because of the unique cap gains windfall. Thank you again

Tell him he's way ahead and be happy to write a big check.

Are there some losses to cash?

I assume this person is just an employee with no ownership in his employer? If so, there is not much planning opportunity. You could make sure he is maxed out on his 401k and make sure he has enough withholding to cover 110% of last year's tax or 90% of the current.

The wages alone will have them up against the $10k salt limit. If they are single you could have them donate non cash items to Goodwill, Salvation Army

If married with kids under 17, it might make sense to see if he can sell some stock for losses and get below the $400k to pick up the child tax credits

Not a lot of options

Would he be open to an investment in a Qualified Opportunity Fund?

If not, tax loss harvest as appropriate. Be mindful of wash sales.

JR1 wrote:Tell him he's way ahead and be happy to write a big check.

Are there some losses to cash?

yep u r right JR1. there might be about 20k in losses that he will be applying

ManVsTax wrote:Would he be open to an investment in a Qualified Opportunity Fund?

If not, tax loss harvest as appropriate. Be mindful of wash sales.

ill take a quick look at Qualified Opportunity Fund. Not very familiar with that

Just watch out for wash sales to get the loss. Wait a month to re-invest his proceeds.

newbie wrote:

ManVsTax wrote:Would he be open to an investment in a Qualified Opportunity Fund?

If not, tax loss harvest as appropriate. Be mindful of wash sales.

ill take a quick look at Qualified Opportunity Fund. Not very familiar with that

in looking at QOF, it seems that it is applicable to unrealized cap gains. so am i correct that once gains are realized they are not applicable here?

Not sure how you came to that conclusion.

This is a good place to start: https://www.irs.gov/credits-deductions/ ... unity-fund

ManVsTax wrote:Not sure how you came to that conclusion.

This is a good place to start: https://www.irs.gov/credits-deductions/ ... unity-fund

ok, thanks. see this link https://www.realwealthnetwork.com/learn ... -benefits/

newbie wrote:

ManVsTax wrote:Not sure how you came to that conclusion.

This is a good place to start: https://www.irs.gov/credits-deductions/ ... unity-fund

ok, thanks. see this link https://www.realwealthnetwork.com/learn ... -benefits/

Thank you for that link ManVsTax. if you look at my link, it is misleading. The question is : what is eligible gain? Obviously from your link it is clear:

Eligible gains include both capital gains and qualified 1231 gains, but only if the gains are:

Recognized for federal income tax purposes before January 1, 2027
Not from a transaction with a related person

If married with kids think about contributing to a 529 Plan and/or Coverdell IRA (longer term term strategy )

Consider a non-deductible IRA and then convert to a Roth iRA .

Any personal non business loans made that is supported by note that became uncollectible in 2020 (short term capital loss deduction )

If considering purchasing a vehicle consider a electric vehicle or hybrid and obtain credit up ro $7,500

Solar panels and credit up to 30 % of AGI

In the case of solar property placed in service after December 31, 2019, and before January 1, 2021, 26 percent.

https://www.irs.gov/newsroom/energy-inc ... nd-answers

Donor Advised Fund?

Great stuff . Thank you to all

ManVsTax wrote:Not sure how you came to that conclusion.

This is a good place to start: https://www.irs.gov/credits-deductions/ ... unity-fund

Hi ManVsTax. i was looking at Opportunity zones and it seems that one would have had to invest in 2019 to get , for example , the 15% tax break since the OZ program has a December 31, 2026 deadline.

Am I incorrect here ?

So, the potential for 5% basis step-up (7-year holding period) ended Dec 31, 2019.

The potential for 10% basis step-up (5-year holding period) ends Dec 31, 2021. There is still time on that one.

i.e. For the full 15% basis step-up, one would have needed to make the investment on or before Dec 31, 2019.

But -- there are a few moving parts that benefit the taxpayer, and the basis step-up is just one.

The commonly talked about one is cap gain deferral until the 2026 tax year or an inclusion event. Whichever happens first.

The other, better one is full basis step-up to FMV and permanent "above and beyond initial investment" gain exclusion if the QOF is held at least 10 years.

Keep in mind the reinvestment deadlines on QOFs if you think this is something your family member might be interested in.