Some wealthy Americans are already prepping their finances for a Joe Biden presidency — here’s how
One San Francisco accountant finishes every client conversation with a discussion about what a Biden administration could mean for portfolios
San Francisco accountant Scott Hoppe had a client who was planning to stretch the sale of founder shares in a tech-sector company over a three-year period.
Instead, the client compressed the installment sale into a one-shot transaction this month.
What accelerated the deal?
The 2020 presidential race. “Assuming all else was equal, that was the driver of the choice,” said Hoppe, principal of the accounting firm Why Blu.
Right now, Hoppe’s client, worth between $10 million and $20 million, will be taxed on capital gains at a rate of 23.8%.
If Democratic candidate Joe Biden beats President Donald Trump — and Democrats retain the House of Representatives and flip the Senate — that client could have potentially been staring at a 39.6% tax rate in two out of the installment sale’s three years.
The compressed transaction, then, could have saved the client approximately $320,000 in taxes on the $6 million sale. “The seller, for sure, was motivated, and the buyer had the wherewithal” to pay the full price upfront, said Hoppe.
Biden’s tax plan would put the marginal rate for top earners back at the Obama-era 39.6% rate, up from the current 37% rate. That 39.6% rate would apply to the capital gains of people who earn more than $1 million. It’s one aspect of a tax proposal where the top 1% of earners would pay for almost 80% of an increase in taxes, according to a budget model from the University of Pennsylvania’s Wharton School of Business.
Election Day is eight weeks away, and the mass of expected mail-in ballots could prolong the wait for a final result, with many states not beginning to count absentee votes till the polls close. Though polling averages in swing states currently give Biden an edge over President Donald Trump, and he’s held a steady lead in national polls for most of the year, polls indicated right up till Election Day in November 2016 that Hillary Clinton would best Trump.
Either way, though, many of America’s affluent households, and the experts who advise them, aren’t waiting.
Hoppe finishes every client conversation with a discussion about what a Biden administration could mean for portfolios vs. a second Trump term. One Illinois financial-planning firm has carried out approximately 50 Roth IRA conversions this year with an eye on the election.
In Houston, Scott Bishop, executive vice president at STA Wealth Management, has fielded election-related calls and emails from half his clients in the past two months.
Bishop’s liberal-leaning clients want to hear about potential opportunities and tend to downplay the idea of new tax rules upending their finances. As for Bishop’s conservative-leaning clients, “they think this is going to hell in a hand basket” and want to get ready to quickly lock in rates and minimize tax exposure if Biden wins.
Bishop — who recalls talking down one client who wanted to “sell everything” when Trump won in 2016 — counsels everyone to think things through. “I try to get them to not act on their biases,” he told MarketWatch.
Reprinted from yahoofinance,the copyright all reserved by the original author.
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