When you have a CPA who is also running your investments, you get a situation where 2+2>4.
That is, at the intersection of tax + investments, a lot of money can be lost (or gained) really quickly by not understanding the tax effects of any particular transaction. EG - I counseled an elderly couple not long ago who have been buying Exxon stock for ever and ever. They had about $900k in Exxon stock, and another $100k in cash. (That’s all they had, other than a house a personal effects.) He was 94 and she was 88.
Random Financial Advisor #4 advised them to sell the shares and diversify to protect against loss. Since the stock was only registered in his name, only his name was going on the account. Thank God they came to see me.
I asked them what their basis was. “Our what?” That’s how much you paid for the stock. “We don’t know.” Well, when did you buy it? “We’ve been buying it our whole lives.” Whose name is on the account? “It’s held directly with Exxon.” Who’s the beneficiary on the account? “Don’t know.”
It turns out that they had a basis of $230k. Had they sold the stock, they would have incurred tax on the capital gains. Plus, then their Social Security would have become taxable. Plus, their pension would have become taxable. Plus, their Exxon dividends would have become taxable. Plus, their interest income would have been taxable. Plus, they would have had no medical deduction for the year (due to the 7.5% limitation). Plus, their other itemized deductions and exemptions would have been limited. Plus, they would have owed NIIT tax. Total tax bill = $130,000.
I told them, “Let’s sell the two tax lots with the biggest basis. We can reduce your exposure to Exxon by about $300k, and only pay about $3k in tax. We’ll do that this year, then we’ll peel off a little more next year, as much as we can without incurring taxes (or at least not very much of them). Meanwhile, we’ll put the $300k of proceeds in a variable annuity with a guaranteed death benefit. That way, you’re guaranteed to not lose money, because your principal is guaranteed by the insurance company.”
“Oh–and since we’re transferring the money to a brokerage account, then this will skip probate. And we’ll put the account in both your names, so the other person automatically takes control at death, without it having to go through the court. And when either one of you dies, you get an automatic step-up in basis, so you can then sell the whole thing with zero taxes.”
(Just a few reasons why you should see a CPA for investment advice.)