With MARS purchasing Wrigley gum, in a cash deal, I'll be hit with a large capital gains tax. How can I avoid?

Should i re-invest? Move the maximum amount to my 401K? I heard that the capital gains tax will go back up in 2009 so I'm wondering if I should cash out now to pay the lower capital gains tax.

With MARS purchasing Wrigley gum, in a cash deal, I'll be hit with a large capital gains tax. How can I avoid?
If it's a long-term cap gains, just pay it and be happy.





We don't know whether cap gains taxes will be raised but I think we can be fairly sure they won't be lowered. And for some buyout deals (I haven't any money in Wrigley so I don't know the details for this one), doing an ordinary stock sale is easier paperwork for taxes than waiting for the deal to complete.





You should almost always max out your 401k if you can, but I'm not sure what the relevance is to this deal. Unless you just mean you wouldn't have maxed out contributions without getting the cash from the Wrigley buyout, in which case yes, put more money in your 401k, or a Roth or traditional IRA, if you can.
Reply:There's nothing you can do to avoid tax on capital gains in your situation other than to offset such gains with any losses or by doing as you suggest and increase your contribution to your 401k (which you should be doing anyway). The Bush capital gains rates (yes that''s right, let's call them by their proper name) will expire in a few years (2010 or 2011, i'm not sure which), so that will not effect your Wrigley's stock game, assuming that the deal closes this year. The current capital gains tax on long-term gains is a maximum of 15% and can be lower depending on your income tax bracket. If you have children, you could gift your shares to them before the transaction closes and they would pay a lower capital gains tax because their income would put them in the lowest tax bracket, but be careful because the kiddie tax could cause part of the gain to be taxed at your rate anyway. Even if Obama or Hillary is elected President, it will take a few months before they can increase your taxes and we can only hope that the new taxes will not take effect until they are passed and signed (as opposed to be retroactive to the beginning of the year in which they are passed, but I wouldn't hold your breath)
Reply:Reinvesting isn't going to make a difference. Putting the max into your 401k is always a good idea if you can do it.





Depending on how the elections go, it's hard to tell what will happen to cg tax, but it wouldn't be a surprise if it's increased.