Tax Tip: Consider Multi-Prong Approach When It Comes to Tax Planning

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When considering individual tax planning, consider a multi-prong approach.

Harvest Stock Losses

Personally owned portfolio securities with accrued 2021 tax losses may be sold in 2021, and the losses may be used to offset other capital gain income. Code section 1091 disallows such tax loss if the taxpayer repurchases the stock or enters into a purchase option within 30 days of the sale.

Watch Retirement Plans

Pension, Profit Sharing, Section 401(K) Plans, and other tax-qualified retirement plans, to the extent required, must pay annual required minimum distributions, or RMDs. The failure to distribute the RMD will result in penalties to the individual participant or beneficiary. Covid-19-related relief is not in effect in 2021.

Consider Gifting

For 2021, the $15,000 annual exclusion for gifts paid to each donee is available to each donor, and such amount increases to $16,000 per donee on Jan. 1, 2022. Some gifts/payments may not count toward the exclusion. For example, grandparents may pay tuition, but not room and board, for their grandchildren without impacting the annual exclusion.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

Philip S. Olsen is a tax attorney at the Boston law firm of Davis Malm, where he focuses on state and local tax consulting and litigation. He has over 25 years of experience litigating and resolving major tax controversies before courts and administrative boards.

Richard J. Hindlian is a tax and business attorney at the Boston law firm of Davis Malm, where he focuses primarily on tax controversies, international and domestic tax planning, and employee benefit plans. Prior to his legal career, Richard crunched numbers as a tax accountant with Ernst & Young.

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