TAX ALPHA

In this conversation on "TAX ALPHA", Frazer Rice and BRENT SULLIVAN (of TAX ALPHA INSIDER) delve into the complexities of tax awareness in investing, focusing on capital gains, income tax, and various strategies for tax efficiency. They discuss the importance of tax loss harvesting, the challenges of managing concentrated portfolios, and the implications of estate planning. The conversation emphasizes the need for advisors and trustees to understand these strategies to optimize tax outcomes for their clients. https://youtu.be/pCIXFq4YoS0 Outline of Tax Alpha Quick Overview of Tax Rates Ordinary vs Capital Gain (Usually Income vs Asset based taxation) Short Term vs Long Term (Long Term Treatment) (we’ll talk about Estate Later) Federal vs State (Can be important!) Netting Losses/Deductions vs Gains and Income Owning assets Taxable vs Non-Taxable vehicles https://open.spotify.com/episode/3uL924aOlPd2hgmC9s7KCI?si=hBS09OKDTd-uHhT8PAj7aA Tax Alpha in stock investing (Universe) Long Only Concentrated Positions Timing – Getting LT Capital Gain treatment Basis – increasing basis Exchange / 351 Funds to defer and diversify Dramatic foreshadowing with step-up later in estate context Blind Trusts for political appointees Diversified Positions Passive (Lower Cost, acceptable returns, “lower risk/tracking error”) Active (Now frowned upon – except in the after tax world w/ TLH) Deferral Carve-Outs like QOZ’s Tax Lost Harvesting Owning an index vs owning a sample of the index Buying Coke and selling pepsi Wash Rules Loss Carry Forwards Capital Losses / Not Ordiany Losses Amplified Tax Loss Harvesting Own the sample of Index AND Borrow off those holdings to create long and short positions to generate capital losses while having beta of 1 Trends: Pre-Liquidity Event planning Storing Losses for the bulky sale Timing the event(s) to have the losses line up with the gains Pre-Diversification planning Pre Death Planning Integrating the Estate Planning with the Income/ Cap Gains Planning Step-Up Avoiding Estate Tax, But Prolonging the Cap Gains Tax exposure (and concentration risk?) Grantor Tax status and he swap power How does turbo charged loss creation look in an estate environment? Trustee/ Executor and Fiduciary / Beneficiary risk issues Vehicle evolution Funds SMA’s 351 and other ETF vehicles (+/-‘s) PPLI,PPVA How did you develop this expertise? How do we find you? Transcript of Tax Alpha Frazer Rice (00:01.122)Welcome aboard, Brent. Brent Sullivan (00:03.035)Well, happy to be here, Fraser. Frazer Rice (00:04.558)It's fun to chat in person. I've been following it to call a blog I don't think gives it the proper respect because I think you're uncovering a lot of great information for advisors like me and wealthy people and other people generally speaking in terms of Really getting going on the tax alpha end of it Let's start a little bit with some basics because I think you know for someone new to the concept of Being particularly tax aware in terms of investing taxes can be, they're more than just income tax, that's for sure. How do you think about it? How do you get your framework around what people are trying to avoid when they're dealing with their investable portfolios? Brent Sullivan (00:45.723)Yeah, I mean, there are really just a couple of different ways to break it down, but I probably start with the concept of a capital gain as a distinct thing from income tax. so capital gains come in really like four different flavors. There's short-term capital gains, short-term capital losses, and then long-term capital gains, long-term capital losses. And then these things are different if you have collectibles or other types of instruments too. But the point is here that you've got those four quadrants that you're always sort of operating in.