Sunday, July 1, 2012

Get Ready for the New Obamacare Investment Tax

I'm guessing some smart young tax advisers have already gamed out the effect the tax will have on markets, business broking and home sales (over the cap gains 'threshold').
The medical device manufacturer stocks are already getting whacked. I thought the paper companies eligibility for the Black Liquor tax ended a couple years ago:
International Paper first-quarter profit grew 93% (Sweet Liquor Eases the Pain*)

From the Wall Street Journal:
It really is happening.

Until this week, investors were waiting to see what the Supreme Court would do about the 3.8 percentage-point surtax on investment income, part of President Obama's health-care overhaul. The Internal Revenue Service hasn't yet released guidance on the new tax.

So when the court affirmed the law on Thursday, investors—and tax advisers—started scrambling.

The new tax, which Congress passed in 2010, affects the net investment income of most joint filers with adjusted gross income of more than $250,000 ($200,000 for single filers). Starting on Jan. 1, 2013, the tax rates on long-term capital gains and dividends for these earners will jump from their current historic low of 15% to 18.8%, assuming Congress extends the current law.

If, on the other hand, Congress allows the tax rates set in 2001 and 2003 to expire on Dec. 31—an unlikely scenario, according to many experts—the top rate on capital gains will rise to 23.8% and the top rate on dividends will nearly triple, to 43.4%.

Whatever the fate of the 2001-03 tax rates, advisers are telling clients to start making moves to minimize the new levy.

Beatrice Mitchell of Sperry Mitchell in New York, a broker of middle-market businesses, says she expects that entrepreneurs looking to sell companies will hurry to do so this year and forgo installment sales, in order to avoid paying the 3.8% surtax.
"Business sellers haven't been paying attention to this tax, but now they are," she says, adding that one client, the head of a 2,000-employee firm, "is in shock."...MORE
The Washington Times put together a list of a few of the various taxes in the bill, we'll have the full list next week: