Investors in the US likely to act sooner rather than later to avoid 2011 tax increases

News - Tax

Written by Ray Clancy

Thursday, 04 November 2010 11:16

Wealthy American investors expect a broad array of tax increases in 2011, prompting some to sell securities before the end of the year to lock in lower rates.

Brokerage executives said that they expect many taxes to rise, including capital gains and income taxes. Also, the estate tax is scheduled to resume next year after a one year hiatus, they told the Reuters Wealth Management Summit.

Tax cuts enacted during the Bush administration are scheduled to expire at the end of 2011. This would affect Americans at all income levels but the Obama administration wants to extend the tax cuts for all but the wealthy.

Tax increases are the second biggest worry for UBS’s wealthy clients, just behind the economy, said Robert McCann, president of UBS Wealth Management Americas.

Capital gains taxes are widely expected to increase, an area of particular interest for wealth managers who buy and sell securities for clients.

‘If we have long-term capital gains and can reclaim them, we will between now and year-end,’ said Jeffrey Maurer, chief executive officer of Evercore Wealth Management, a unit of Evercore Partners.

Maurer said if clients own a taxable, fixed income security, his advisers would look to sell that security now, under the current tax rate, rather than hold it and face higher rates in 2011.

Other executives said they were surprised the hazy tax picture has not prompted more companies to declare one off special dividends, or encourage more business owners to take their companies public, a major wealth generating move.

Some large companies are considering the possibility of higher taxes and the impact on shareholders.

Fred Tomczyk, chief executive of TD Ameritrade Holding, said it has issued a third quarter dividend of five cents a share, the first in the online brokerage’s history, in part to get ahead of the vague tax picture in 2011. ‘There are a lot of investors that would like to crystallize their capital gains before any possible tax increase,’ he added.