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So, yes, I unfairly have inherited money, which is currently invested in various ways with 3 different investment companies.
The neighbors of the home I live in have asked to purchase my property, and I have agreed and we have ageed on a price. Because I bought this property for cash, when I sell the property I will get a large chunk of cash.
So I have been looking for another property for a home. I have found one I like, and it is $ 60,000 more than the one I am selling.
I had originally been thinking of buying the new property by having the investment company I like the least (call it #1) liquidate my investment in two mutual funds, then use the cash for the purchase. Then I had thought that I would put the cash I receive from the sale of my current home in the pot that a different investment company manages (call it #3). The advisor at firm #1 informed me that if I did this I would have to pay several thousand dollars in capital gains taxes (which I knew, but it was still a little sticker shock when he told me the probable amount).
But I was talking to my advisor at firm #2, and he said that instead I should have firm #1 transfer all of my investments with that firm to firm #2, then take out a line of credit with #2 to purchase the new property. Then when I receive the funds from the sale of my current property, I could use it to pay down the line of credit. He says that there are tax advantages to this.
I want to build my investments with firm #3 (a socially responsible company.)
Is the advice from firm #2 logical, or is there a better solution which will allow me to minimize my tax burden and also build what I have with firm #3?
So, yes, I unfairly have inherited money, which is currently invested in various ways with 3 different investment companies.
The neighbors of the home I live in have asked to purchase my property, and I have agreed and we have ageed on a price. Because I bought this property for cash, when I sell the property I will get a large chunk of cash.
So I have been looking for another property for a home. I have found one I like, and it is $ 60,000 more than the one I am selling.
I had originally been thinking of buying the new property by having the investment company I like the least (call it #1) liquidate my investment in two mutual funds, then use the cash for the purchase. Then I had thought that I would put the cash I receive from the sale of my current home in the pot that a different investment company manages (call it #3). The advisor at firm #1 informed me that if I did this I would have to pay several thousand dollars in capital gains taxes (which I knew, but it was still a little sticker shock when he told me the probable amount).
But I was talking to my advisor at firm #2, and he said that instead I should have firm #1 transfer all of my investments with that firm to firm #2, then take out a line of credit with #2 to purchase the new property. Then when I receive the funds from the sale of my current property, I could use it to pay down the line of credit. He says that there are tax advantages to this.
I want to build my investments with firm #3 (a socially responsible company.)
Is the advice from firm #2 logical, or is there a better solution which will allow me to minimize my tax burden and also build what I have with firm #3?
Thank you!
Is the tax basis of the investments close to their current value? If so, go ahead and liquidate.
If not, then you probably should borrow somehow, and the question becomes how. If your portfolio is worth more than (say) 4X the price of what you are buying, I would not be all that terrified of margin. You'd borrow the full amount on margin, buy the property, and then sell the old one and pay the margin off.
Risk of margin calls is next to zilch, if the portfolio is diversified and you only borrow 25% of its value.
If the portfolio is NOT worth this much, then buy with a mortgage, to avoid the risk of being forced to sell assets at a loss. Better yet, get an equity loan on old home with no closing costs and no prepayment penalties to pay "cash" for the new property, and don't tell them you're about to sell it!*
(If you can't quite get enough out to do the trick, then at least you've reduced the amount of your portfolio you need to liquidate, thus saving money on capital gains taxes).
*Also don't list the property for sale until after you get the loan...
I think I've decided to move most of my investments with firm #1 to firm #3, then do the line of credit with #2 to purchase the property, repaying rapidly with the funds from the sale of my current property. I will ask about interest rates and about the issue of margin calls (but I don't think the latter will be an issue.)
If anyone else wants to chime in, that would be great!
I think I've decided to move most of my investments with firm #1 to firm #3, then do the line of credit with #2 to purchase the property, repaying rapidly with the funds from the sale of my current property. I will ask about interest rates and about the issue of margin calls (but I don't think the latter will be an issue.)
If anyone else wants to chime in, that would be great!
Just to add, if you find the interest rates are high on the margin, you might want to look at getting a HELOC on the new house.
If you can find a no-closing cost HELOC, you could come out ahead. Margin rates at some firms are surprisingly high - e.g. 6% or 7%, with good credit a HELOC would be cheaper as long as there are no closing costs.
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