I’m on the crosstown bus the other day. The M79. Vampire Weekend wrote an entire song about it.
So I’m seated near the front of this double-long bus and the only two people remaining on board, besides myself and the driver, are two elderly ladies. I’d place them in their seventies. They’re seated in front of me. Closer to the driver.
First lady: “Let me ask you a question. How much do they tax you when you sell your stock.”
Second lady: “You mean like capital gains.”
First lady: “Like capital gains.”
Second lady: “I’m not sure but I think it’s more if you sell it quickly. Like in a year.”
First lady: “Because I have some Apple stock. And I don’t know if I want to sell it. I bought it at $100, then it went to $700, then it split by seven, now it’s $300. I don’t know what to do.”
At this point my nostrils flared. This lady bought Apple at least 10 years ago. It’s gone up 22 times since she bought it. If she’s not rich, she’s at least way better off than she was. And yet she sounds so, well, agonized. Like she’s trying to figure out a way to reap the profits of her stock without having to pay any taxes on it.
Of course she’s held it long enough that she won’t pay the 37% rate you pay when you unload a stock in less than a year. But, I mean, she’s held it more than a decade. She’s going to pay the least amount of taxes possible. I said nothing.
First lady: “I think I’ll just hold on to it.”
She’d rather hold the stock and reap no financial reward than have to share any of it with Uncle Sam. At least her grandkids will be happy.
You don’t pay “37%” unless your specific income tax rate is 37%. You don’t get the 15% long-term rate (which you also don’t get if your income is hundreds of thousands) but you also don’t get taxed at the highest rate unless that is your rate (based on your total income). However, GAMBLING ‘income’ (including lottery wins) DO get taxed at the highest rate no matter your income level.
Plus, based on what you write of the woman’s conversation, why do you think she’s just trying to get out of paying taxes?! And why SHOULD’NT she hold on to it if she wants to?! Plus, selling that stock may push her into higher tax brackets when she doesn’t need the money! That would be stupid!
And you’re damn right that the “grandkids” will be happy – they’ll get the “stepped-up” stock price (what it will be when she dies) versus what she paid for it. This is one of the many ways the RICH have passed on their money & shield much of it from taxes.