Custom Structured Settlements Shares Crucial Capital Gains and Losses Counsel

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James Smyth and Arthur Jensen, of Custom Structured Settlements, LLC, list the top ten tips about capital gains and losses:

James Smyth, Executive Director of Custom Structured Settlements, LLC

People don’t realize they only cheat themselves and their families when paying the capital gain tax.

James Smyth, Executive Director of Custom Structured Settlements, LLC, and Arthur Jensen, Senior Tax Director of Custom Structured Settlements, LLC, list the following ten tips regarding what one should know about capital gains and losses:

No. 1: When one pays the tax, they never get it back. A recognized capital gain never carries forward against future losses. Once paid, that money doesn’t come back.

No. 2: The growth one loses when they pay the capital gain tax really is irrecoverable. “Assume the market averages 7% growth over the next 20 years. Defer the tax, invest only 25% tax free, and the other 75% is yours to play with. In 20 years, your $.25 grows to $1.00, and you have the tax you owe without interest or penalty,” added Jensen. “People don’t realize they only cheat themselves and their families when paying the capital gain tax.”

No. 3: People increase their own financial risks when they pay capital gain tax unnecessarily. “When static living costs apply against a return on investment, the smaller your investment, the less left over to grow,” noted Smyth. “And when you pay capital gain tax and reduce your capital by 25% with Affordable Care Act and Medicaid taxes, your risk against market downturns, to manage your lifestyle and grow, is exponentially increased.”

No. 4: A 25% tax means 33% less income. A 33% tax means 50% less income. “If you have $1,000,000 tax bill and pay $250,000 tax, you have $750,000 left,” said Jensen. “Since $250,000 is 33% of $750,000, you’ll make 33% more income on reinvestment when you defer that $250,000 tax. Since $333,333 is 50% of $666,667, you’ll have 50% less income from remaining principal if you pay a 33% capital gain tax.”

No. 5: Individuals give at least five years of their life to the government when they pay the capital gain tax. “When you consider how long it has been since the value of your asset was worth 20% or 25% less, or whatever your capital gain rate, you are giving those years, expertise and resources 100% to the government and without compensation,” added Smyth.

No. 6: Individuals give another five years or more to the government to recover the capital gain tax paid. All of that time is one’s gift to get back to where they were before choosing not to defer. Remember that pre-tax dollars required to recover after-tax dollars must be earned at progressive rates on top of the cost to live.

No. 7: The time one loses earning the money back is lost earnings against their future. “You never, ever receive a return for the extra energy and expertise expended,” said Jensen. “You never are compensated for the extra cost of life hours, risk, and resources required to earn your way back to where you were, and pay taxes on that income along the way.”

No. 8: One’s business and borrowing leverage and earning capacity are seriously restricted when they pay capital gain tax. Paying the capital gain tax reduces one’s balance sheet, the liquid capital available to earn income, and the size of opportunities available.

No. 9: The lower income resulting from paying capital gain tax affects real lifestyle choices now or later. “Tax isn’t due until the income is recognized,” said Smyth. “Defer recognition, have the advantage of growth on bigger principal, then choose lower tax years with lower rates as the future unfolds.”

No. 10: The lower income reduces one’s financial legacy. “Paying capital gain taxes reduces your ability to make the difference you are intended to make, at least as to things money can provide for,” concluded Jensen.

About Custom Structured Settlements, LLC
Custom Structured Settlements, LLC helps with structured settlements of taxable transactions. Its services ensure enormous tax savings, asset protection, wealth preservation and legacy planning. For more information, please call (317) 268-8880, or visit Custom Structured Settlements, LLC is located in the SePRO Tower, 11550 N. Meridian Street, Suite 125, Carmel, IN 46032.

For media inquiries, please call 805.650.6121, ext. 361.

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