Author Topic: Need advice on selling apple  (Read 14362 times)

John122

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Need advice on selling apple
« on: August 31, 2014, 03:23:49 PM »
1st time posting.. I have owned apple stock(3500 shares split adjusted) since 2007 in a taxable acct. and I want to start selling soon to go into safer Vangaurd funds. I know I will be getting hammered with taxes, but I want to sleep better getting closer to retirement... I'm embarrassed to say that apple is 75% of my portfolio, but I also know how blessed I am for the run it has had.  Don't beat me up to badly as I know that I need to diversify my holdings... Thanks

Left

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Re: Need advice on selling apple
« Reply #1 on: August 31, 2014, 03:43:21 PM »
why sell, or sell all of it at once? Leave it alone and use it to rebalance/withdraw first

I'd leave it alone until you need to move money out of stocks, and then take it out of that one first before touching indexes

KingCoin

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Re: Need advice on selling apple
« Reply #2 on: August 31, 2014, 04:13:35 PM »
why sell, or sell all of it at once? Leave it alone and use it to rebalance/withdraw first

I'd leave it alone until you need to move money out of stocks, and then take it out of that one first before touching indexes

Why sell? Because he has 75% OF HIS PORTFOLIO IN ONE STOCK. That's gambling, not investing.

Ultimately, I'm not sure what the question is here. Maybe you're just facetiously one-upping this thread?:
http://forum.mrmoneymustache.com/investor-alley/i-have-$31k-in-aapl-stock-am-i-an-idiot/

You seem like you know what you need to do. Login to your brokerage account, sell 90-100% of your AAPL stock, and allocate the money to a balanced collection of index funds. Easy peasy. Do it Tuesday.

You've experienced the investing equivalent of hitting blackjack five times in a row. Even if it's tempting to keep playing your hot streak, It's high time to calmly walk away from the table.


John122

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Re: Need advice on selling apple
« Reply #3 on: August 31, 2014, 04:27:56 PM »
Not trying to one up anyone, just trying to get some sound advice and not pay the taxes all at once.. Thanks for the advice!

milesdividendmd

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Re: Need advice on selling apple
« Reply #4 on: August 31, 2014, 04:37:58 PM »
You Couldn't have picked a better stock to have invested in. Great job!

The key is for you to get out of your position in the most tax efficient manner possible.

I'm assuming your Apple stock is in a taxable account?

Things to consider will be using offsetting your capital gains with tax losses from other investments, avoiding going up in tax bracket by selling off too much in any given year, and so on.

I would not sell all of your shares at once. And I would consider talking to a tax lawyer about the best way for you to get out of your position.

Good luck!

John122

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Re: Need advice on selling apple
« Reply #5 on: August 31, 2014, 04:53:51 PM »
"Things to consider will be using offsetting your capital gains with tax losses from other investments, avoiding going up in tax bracket by selling off too much in any given year, and so on"

THANK YOU for this advice... I wasn't even thinking about the selling putting me in a higher tax bracket... I will be contacting a CPA...

milesdividendmd

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Re: Need advice on selling apple
« Reply #6 on: August 31, 2014, 05:14:39 PM »
One more point to take a little bit of the pressure off of you. Apple is currently held by many of the most successful hedge fund billionaires out there.

Off the top of my head, Einhorn, Icahn, Tepper, and Dalio, all have big stakes in apple.

So although you are definitely taking on uncompensated risk, at least you are in the good company of smart money guys.

Joshua

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Re: Need advice on selling apple
« Reply #7 on: August 31, 2014, 05:38:15 PM »
Remember that any long term capital gains falling in the 10 and 15% tax brackets are tax free. And anything else is 15% flat tax. So may be not as bad as you think...

KingCoin

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Re: Need advice on selling apple
« Reply #8 on: August 31, 2014, 05:42:07 PM »
"Things to consider will be using offsetting your capital gains with tax losses from other investments, avoiding going up in tax bracket by selling off too much in any given year, and so on"

THANK YOU for this advice... I wasn't even thinking about the selling putting me in a higher tax bracket... I will be contacting a CPA...

Most likely these will be taxed as long term capital gains, so you shouldn't have to worry about income generated bumping you up a tax bracket. The good news is that long term capital gains taxes are at historic lows (and not likely to go lower), so now is as good a time as any to take the hit. As milesdividendmd indicated, it will certainly make sense to offset gains with any losses you have in your portfolio. Talking to a CPA is certainly worthwhile.

I strongly suspect that when everything shakes out, selling it all will be the right thing to do. I'm having a hard time thinking a scenario where continuing to hold makes sense.

One more point to take a little bit of the pressure off of you. Apple is currently held by many of the most successful hedge fund billionaires out there.

Off the top of my head, Einhorn, Icahn, Tepper, and Dalio, all have big stakes in apple.

So although you are definitely taking on uncompensated risk, at least you are in the good company of smart money guys.

While this is true, none of them have holdings approaching anywhere near this level of concentration. AAPL as a stock pick becomes essentially irrelevant for the purposes of this discussion.

milesdividendmd

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Re: Need advice on selling apple
« Reply #9 on: August 31, 2014, 05:52:52 PM »

"Things to consider will be using offsetting your capital gains with tax losses from other investments, avoiding going up in tax bracket by selling off too much in any given year, and so on"

THANK YOU for this advice... I wasn't even thinking about the selling putting me in a higher tax bracket... I will be contacting a CPA...

Most likely these will be taxed as long term capital gains, so you shouldn't have to worry about income generated bumping you up a tax bracket. The good news is that long term capital gains taxes are at historic lows (and not likely to go lower), so now is as good a time as any to take the hit. As milesdividendmd indicated, it will certainly make sense to offset gains with any losses you have in your portfolio. Talking to a CPA is certainly worthwhile.

I strongly suspect that when everything shakes out, selling it all will be the right thing to do. I'm having a hard time thinking a scenario where continuing to hold makes sense.

One more point to take a little bit of the pressure off of you. Apple is currently held by many of the most successful hedge fund billionaires out there.

Off the top of my head, Einhorn, Icahn, Tepper, and Dalio, all have big stakes in apple.

So although you are definitely taking on uncompensated risk, at least you are in the good company of smart money guys.

While this is true, none of them have holdings approaching anywhere near this level of concentration. AAPL as a stock pick becomes essentially irrelevant for the purposes of this discussion.

I can easily come up with a negative tax scenario for selling all at once.

Such as OP is in the 15 % tax bracket now and pays no LTCG/qualified dividends taxes on his first 70K plus in LTCG taxes. Selling his apple all at once pushes him over this limit and subjects him to unnecessary taxes.

While I agree that 70% of his portfolio in one stock is not wise, long term, the only point is that if I had to pick a stock to be in such a position apple would be near the top of my list.

The hedge funds cited do all own apple as less than 5 % of their portfolio which is an important point.

John122

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Re: Need advice on selling apple
« Reply #10 on: August 31, 2014, 05:57:25 PM »
What would the capital tax be.. I'm looking at 288,000 in gains if sold all this year.

divinvestor

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Re: Need advice on selling apple
« Reply #11 on: August 31, 2014, 07:20:53 PM »
As Joshua pointed out earlier, your long term capital gains would be capped at a flat 15%, regardless of your income tax bracket. So, if your capital gains are $288,000 as you said, your taxes would be 0.15*288,000 = $43,200. That's a pretty big tax hit, but like someone else said, you hit the jackpot a few times with this investment. Take your gains, pay your taxes, and be really happy about it, if you do decide to sell all of it. Having to pay taxes is not reason alone not to sell a stock at a gain.

John122

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Re: Need advice on selling apple
« Reply #12 on: August 31, 2014, 08:07:14 PM »
If I sold my position would the gain be included in my years income?  Would year end income be 288,000 plus what I make already, putting me into a higher tax bracket,  making my health insurance un- affordable next year?

TomTX

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Re: Need advice on selling apple
« Reply #13 on: August 31, 2014, 08:19:47 PM »
What would the capital tax be.. I'm looking at 288,000 in gains if sold all this year.

As has been stated - it depends on your tax bracket. Are you still in the 15% bracket? How much gains can you take and stay in the bracket? Maybe you want to take $40k in gains per year, because that keeps you at zero cap gains tax.

divinvestor

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Re: Need advice on selling apple
« Reply #14 on: August 31, 2014, 08:44:18 PM »
@John122, you are correct, the 288k gains would be added to any income you already make. I just did some research and the long term cap gains if you are in the very top 39.6% tax bracket would be 20%, not 15% as previously stated. It's 15% cap gains tax for people in the 25%-35% tax brackets. So, you'll need to determine if you will be in that 39.6 tax bracket to see if you pay 15% or 20% LTCG. For single filers, the 39.6% tax bracket is for people making at least $406,751 per year. If you're married filing jointly, it's $457,601 or more.

KingCoin

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Re: Need advice on selling apple
« Reply #15 on: August 31, 2014, 08:50:01 PM »
If I sold my position would the gain be included in my years income?  Would year end income be 288,000 plus what I make already, putting me into a higher tax bracket,  making my health insurance un- affordable next year?

Your tax bracket is based on "ordinary income". Long term capital gains (as well as qualifying dividends) won't affect your tax bracket, so for all intents and purposes, your sale of AAPL stock will be treated as a separate tax item and won't have any negative "knock-on" effects. The one benefit of being in a lower tax bracket would be that you might be taxed at a lower rate than the maximum 20% capital gains rate (i.e. someone might argue that you should wait until retirement to start divesting in shares of AAPL), but there's not a significant enough difference to justify holding onto an incredibly outsized position in AAPL.

I'm not an accountant, so you'll want to iron all that out with a CPA, but that's my understanding.

DK

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Re: Need advice on selling apple
« Reply #16 on: August 31, 2014, 08:57:43 PM »
If you know what your income will be, I would try to keep it in the 15% bracket, so any of your sales of AAPL will be 0%. Then spread it out over the years to pay less taxes on it. I have some money invested in AAPL, and have no plan to sell. Of course, I do not have that amount either, but I would keep some of it in there.

We could make some better suggestions if we knew what your income was and what bracket you will be in.

CanuckExpat

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Re: Need advice on selling apple
« Reply #17 on: August 31, 2014, 09:06:28 PM »
I'd normally also echo the advice to consider selling across multiple years in order to avoid the tax bite, BUT you have 75% of your portfolio in a single stock and you are approaching retirement!!

You don't want the tax tail to wag the entire portfolio dog. If in order to minimize taxes, it takes you 5 years to get to a more reasonable allocation and diversification, consider how much risk you are taking on for the sake of avoiding some taxes.

John122

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Re: Need advice on selling apple
« Reply #18 on: August 31, 2014, 09:07:18 PM »
My gross adjusted income should be around 65,000 this year.

innerscorecard

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Re: Need advice on selling apple
« Reply #19 on: August 31, 2014, 10:06:56 PM »
I'd dispute the assertion that AAPL is riskier than, say, VTI. Diversification is not a guarantee of safety. It's possible that in a correction, the broad market could drop much farther than megacaps such as AAPL or BRK.B. After all, AAPL is still cheaper, especially considering its cash hoard, than the market as a whole.

Why did you buy AAPL in the first place? Has your thesis changed since then?

Dodge

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Re: Need advice on selling apple
« Reply #20 on: August 31, 2014, 11:03:39 PM »
75% of your portfolio in a single stock, and you're approaching retirement?  I don't think I've seen a more dangerous position yet on this forum.  I'd sell immediately, and rebalance into your diversified stock/bond portfolio.  Who knows what could happen to Apple stock in the next few years you'd be waiting if you sold over time.

John122

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Re: Need advice on selling apple
« Reply #21 on: September 01, 2014, 06:16:50 AM »
I'd dispute the assertion that AAPL is riskier than, say, VTI. Diversification is not a guarantee of safety. It's possible that in a correction, the broad market could drop much farther than megacaps such as AAPL or BRK.B. After all, AAPL is still cheaper, especially considering its cash hoard, than the market as a whole.

Why did you buy AAPL in the first place? Has your thesis changed since then?

My thesis has not changed, I bought because I believe apple is the best run buisness out there and the best bang for my buck..

Louis Naveiller quote...

I know I said I wouldn't bore you, but I would be remiss not to say it: I'm not advocating that you put your entire portfolio in Apple or any other opportunity that comes our way, no matter how much of a sure thing it appears. But if you had to make a large investment in one company, Apple would be my heartfelt answer. Of course, I'd rather you made it a core position in a diversified portfolio one that combines investments from across the market cap, geographic, and sector spectrums.
 
I'm just looking for the best way to make my portfolio safer going into my later years and avoid a large tax hit, and I want to thank all of you for sharing your knowledge with me..

desk_jockey

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Re: Need advice on selling apple
« Reply #22 on: September 01, 2014, 07:16:52 AM »
I agree with the other posters that your portfolio is far too heavily weighted in one stock.

Are you single or married?    If married then up to about $74K income is at the 15% ordinary income rate, which has 0% federal tax on capital gains.   With an income an income of $65K, that leaves you with about $9K / year that still qualifies for 0%.   Regardless if you are married or not, iif you sell all the shares you are still below the point that federal capex rates jumps to 20%, so you don't have to worry about that.

If single there are no differences in the tax consequences if you sell 100% now, or if you spread the sale out over 3 or 4 years.  If married, there would be a small difference.   If married, I would probably sell off all but ~$35K this year, and reinvest the after tax money in vanguard funds.  Then I'd sell off the last of $35K of the stock over the next few years at amounts that keep me at or near the 0% federal capex rate.   

Keeping $35K leaves you with less than 10% of your portfolio in one stock, which for me personally I wouldn't find too risky.

Finally, do you sell now or later?   You should acknowledge that any sale planned for 2014 that you make later than next week is purely gambling on speculators responses of the Apple September product launches.

Finally remember that the above are federal tax rates only, and your state may apply an additional tax. 

hodedofome

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Re: Need advice on selling apple
« Reply #23 on: September 01, 2014, 08:44:16 AM »
It may be ok at this point in the year to spread the selling into 2015 to minimize the effect of putting you in a higher tax bracket. But I wouldn't go further than January 2015. If you tried to sell over 3 or 4 years you could find out that the stock goes down a good bit (for whatever reason - nobody can know) and whatever tax deduction you did was more than offset by a lower stock price. Hard to see the stock down 30 percent between now and January though.

DK

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Re: Need advice on selling apple
« Reply #24 on: September 01, 2014, 09:18:49 AM »
So judging by his numbers, he invested about $70,000 in AAPL @ ~$20......add in his $288,000 of gains, and he has $357,000 in AAPL.....and a total portfolio of ~$476,000. ($119,000 outside of AAPL in a index? fund).

One easy thing to do where taxes would not have to be worried about, is sell the initial investment of 70K. That would knock down AAPL to closer to 50% of portfolio size...w/o taxes...and 'lock-in' some gains.

Per your income - is it filing single or married? Then we know if your income will be in the 15% bracket or not.

Do you have a 401k to invest in? You could do something like putting in 17.5K in a 401k, then sell 17.5K from your AAPL stock, and you would have more disposable income that way, since your long term gains are taxed lower. Plus you would still have the same invested amount, which you could invest in an index fund.

TreeTired

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Re: Need advice on selling apple
« Reply #25 on: September 01, 2014, 09:32:06 AM »
Quote
making my health insurance un- affordable next year?

What does that mean?  Are you buying your own ACA policy with the help of subsidies  -   subsidies that will disappear if your MAGI exceeds specified levels? 


Personally,  if I was in your enviable situation I would sit down with a trusted tax accountant and look at the tax implications of realizing capital gains this year.   I would note break points that generate a higher marginal tax rate, either through higher capital gains tax rates or lost tax credits or both,  and I would probably try to go up to one of these points without exceeding it,   ie realize any 15% taxed gains I can without going into the 20% bracket.   I wouldn't be too worried about reducing exposure from 75% to 50% or 45% this year and cut back more early next year.   After all, you are over concentrated because that one stock did very well.  If you had been diligent about re-balancing every year or every 6 months to reduce your percentage of any one stock you wouldn't have this problem, and you wouldn't have this portfolio balance either.

Also, if you have any interest at all in giving to charity at any time in the future,  I would  strongly consider donating some appreciated shares to a charitable gift fund.  If you donated $50,000 worth of stock (just an example, not a suggestion) you could fund your charitable giving for many years.
« Last Edit: September 01, 2014, 09:53:02 AM by NC_MJ »

electriceagle

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Re: Need advice on selling apple
« Reply #26 on: September 01, 2014, 09:49:33 AM »
It may be ok at this point in the year to spread the selling into 2015 to minimize the effect of putting you in a higher tax bracket.

OP should do the math on the effect of spreading the sale out vs. taking it all in one year. An easy way to do this is by plugging the numbers into last year's tax software and assuming no significant changes in tax law.

OP should check with a tax professional and assess his risk, but he may be able to write in-the-money covered calls (but not too deep) for Jan 2015 and Jan 2016 to both generate cash income and transfer some risk. He would be giving up future gains in AAPL in exchange for cash now that can be invested in an index fund plus a buffer against small drops in the AAPL share price. He could still lose money if there is a big drop in AAPL.

John122

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Re: Need advice on selling apple
« Reply #27 on: September 01, 2014, 03:26:27 PM »
I am married... And I will be setting up an appointment with my tax acct. to start selling the right amount as to not going into the 20% tax rate. I would be comfortable having apple as 25-30 % of my portfolio, I'm sure it will take a couple of years to reach the point... Thanks again to all!!

John122

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Re: Need advice on selling apple
« Reply #28 on: September 01, 2014, 03:29:23 PM »
So judging by his numbers, he invested about $70,000 in AAPL @ ~$20......add in his $288,000 of gains, and he has $357,000 in AAPL.....and a total portfolio of ~$476,000. ($119,000 outside of AAPL in a index? fund).

You are right on with you #'s, I own 2 other funds

Joel

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Re: Need advice on selling apple
« Reply #29 on: September 01, 2014, 03:37:02 PM »
If you are married, you will be able to sale all of it in one tax year. Some of the gains would be at 0% and the remaining would be at 15%. You would not hit the 20% long term capital gains rate. Sell it and be happy with your appreciation. Quit gambling.

CanuckExpat

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Re: Need advice on selling apple
« Reply #30 on: September 01, 2014, 04:25:52 PM »
We're all talking about the large percentage of his portfolio that is in one stock, the other thing that is not clear to me is do you have any fixed income component to your portfolio?
It all depends on your goals and your risk tolerance, but when you say you are "near retirement", I wonder if you shouldn't evaluate your asset allocation as a whole.

DK

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Re: Need advice on selling apple
« Reply #31 on: September 01, 2014, 07:58:56 PM »
If you are married, you will be able to sale all of it in one tax year. Some of the gains would be at 0% and the remaining would be at 15%. You would not hit the 20% long term capital gains rate. Sell it and be happy with your appreciation. Quit gambling.

^^^This. People keep getting confused about what taxes he will pay on his gains.

milesdividendmd

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Re: Need advice on selling apple
« Reply #32 on: September 01, 2014, 08:45:49 PM »
I'd dispute the assertion that AAPL is riskier than, say, VTI. Diversification is not a guarantee of safety. It's possible that in a correction, the broad market could drop much farther than megacaps such as AAPL or BRK.B. After all, AAPL is still cheaper, especially considering its cash hoard, than the market as a whole.

Why did you buy AAPL in the first place? Has your thesis changed since then?

This is confusing 2 types of risk.

The first risk is market risk or beta. And there is no escaping this risk through diversification or any other means. This is why Stocks have outsized returns: the risk premium.

The second type of risk is uncompensated risk, or the risk that can be diversified away.  VTI has no uncompensated risk, and owning a Significant proportion of your portfolio in a single stock such as Apple has loads of it. The problem with uncompensated risk, as suggested by it's name, is that you do not get paid for it. It is risk that you take on for no good reason.

If you hold small concentrated positions your chances of both extremely bad events and extremely good events go up. Which overtime is not probabilistically not good for your portfolio.

Scandium

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Re: Need advice on selling apple
« Reply #33 on: September 02, 2014, 08:37:49 AM »
Is LTCG taxed progressively? I thought there were only two flat rates, 15% and 25% depending on your AGI. But it's my understanding that all gains are taxed at the flat rate, i.e. from the 1st dollar? Is this not the case?
« Last Edit: September 02, 2014, 08:50:12 AM by Scandium »

TreeTired

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Re: Need advice on selling apple
« Reply #34 on: September 02, 2014, 09:54:33 AM »
This is turrrrible!   Every day you delay your "problem" keeps getting bigger and bigger!   

skyrefuge

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Re: Need advice on selling apple
« Reply #35 on: September 02, 2014, 10:55:07 AM »
It seems like this is a situation where the (admirable) Mustachian impulse of "optimize everything" is being reflexively and inappropriately applied. Yeah, focusing on taxes is a good way to avoid unnecessarily losing money in a lot of situations, but this is not one of those situations! Here the unnecessary loss of money via the volatility of a single stock is where the focus should be.

If you make a bunch of money, taxes are almost always going to be a consequence of that. I never see anyone here say "you should really think twice about taking that job!!! Because if you get an income, you'll have to pay taxes on it!" But for some reason when that income comes via capital gains we have a greater expectation that we're better off finding ways to avoid it.

Just two years ago, AAPL dropped 25% in less than 2 months (eventually dropping 44% in 7 months). It doesn't even have to drop close to that amount to result in a greater loss of money than the tax hit of selling it all today (but hey, that loss would reduce your tax bill, so maybe you should actually hope for that to happen!!)

And just a basic reminder: the gains are likely to be taxed at some point in your life anyway. Yeah, it's better to pay taxes later than it is to pay them now, and if you get lucky you might be able to pay less in total in the future than you would now, but this isn't a case where it's "pay a giant tax bill now" vs. "pay nothing ever".

Finally "making my health insurance un- affordable next year?" still makes me wonder if we're all just getting sucked in by a troll here. You just earned $288,000 doing nothing...I think that's enough to pay your insurance premiums!

John122

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Re: Need advice on selling apple
« Reply #36 on: September 02, 2014, 03:49:23 PM »
Finally "making my health insurance un- affordable next year?" still makes me wonder if we're all just getting sucked in by a troll here. You just earned $288,000 doing nothing...I think that's enough to pay your insurance premiums!


Even though my holdings are in a taxable acct. these funds are hands off until I retire in hopefully 5 years. So yes I am concerned about selling apple and having that sale put me in a higher tax bracket and increase my AGI for next year which would make my Obama crap insurance increase quite a lot.. And I didn't earn 288k (now 291k) overnight I have been savings for 25 years, yes I should of been more diverse in my holdings....

 And that's why I asked the question in the 1st place, to get an answer to my problem from wiser investors than myself!!

dragon

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Re: Need advice on selling apple
« Reply #37 on: September 02, 2014, 04:32:39 PM »
Some thoughts:
Your long term capital gains are taxed at one rate: 0, 15, or 20% (not some at 0% and some at 15%).
This makes me a fan of selling enough stock and staying in a bracket so that your cap gains rate is zero.

Another complication is the reduction of itemized deductions and exemptions.
If your income is over 250k for the year, these create an additional tax burden (~3% for a family of 2).
And there is the additional Medicare tax of 3.8% on cap gains if your income is above a threshold (I believe 250k).
Add these up, and the 15% cap gains rate becomes 21.8%; or about 50% more taxes.

Some good tax planning is in order.

I do agree with folks that your good fortune has left you highly concentrated. Maybe there are other ways to reduce your exposure to Apple.

Is it correct to state that your shares are worth about $350k, and the rest of your net worth is $120k?  I calculated this from 3,500 shares at $100 each is 75% of portfolio. Or, do you have other assets that are not part of your portfolio?  If so, how much?

Reducing apple exposure. It's worth looking into purchasing puts on the stock, this way if the stock goes down, the puts make money. This would be a placeholder until you are able to divest of most of the shares.
I'm comfortable holding 10-12% of my net worth in an individual stock that I have researched. I've heard 15%, but that doesn't pass the gut test for me (I get nervous).
So, I'd recommend getting apple down to 10-12% of your net worth. (edit: or even the 25-30% you mentioned above)

I'm going to see if I can model the taxes in more detail for you later.
-dragon
« Last Edit: September 02, 2014, 04:51:47 PM by dragon »

John122

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Re: Need advice on selling apple
« Reply #38 on: September 02, 2014, 04:55:11 PM »
Thanks. Dragon....

Is it correct to state that your shares are worth about $350k, and the rest of your net worth is $120k?  I calculated this from 3,500 shares at $100 each is 75% of portfolio. Or, do you have other assets that are not part of your portfolio?  If so, how much?

Yes, that is close to my total portfolio, not my net worth, just my retirement holdings, other assets are above that, that include house, business, cars, emergency fund etc.
« Last Edit: September 02, 2014, 04:57:05 PM by John122 »

dragon

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Re: Need advice on selling apple
« Reply #39 on: September 02, 2014, 05:31:25 PM »

So, I think it's important to include some of those assets in your net worth.  We can leave the cars out, but I think we should include the house and the cash, and the value of the business as well.
How old are you?  Do you expect a pension or social security benefit?

The $450k assets, using a 4% withdrawal rate is $18k per year.  Is this enough for you to FIRE? Or, are you depending on other streams of income.

John122

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Re: Need advice on selling apple
« Reply #40 on: September 02, 2014, 05:59:23 PM »
Net worth is around 650k not including my buisness, my age is 51.. Apple pays me 7k in dividends a year, will be taking SOS at 62..

Joel

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Re: Need advice on selling apple
« Reply #41 on: September 02, 2014, 08:52:32 PM »
Is LTCG taxed progressively? I thought there were only two flat rates, 15% and 25% depending on your AGI. But it's my understanding that all gains are taxed at the flat rate, i.e. from the 1st dollar? Is this not the case?

Long-Term Capital Gains are taxed progressively.

If you have 10,000 in ordinary income and 1,000,000 in long-term capital gains, the LTCGs will be taxed at the various marginal tax rates. (Some at 0%, some at 15%, and some at 20%)

Joel

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Re: Need advice on selling apple
« Reply #42 on: September 02, 2014, 08:54:44 PM »
Some thoughts:
Your long term capital gains are taxed at one rate: 0, 15, or 20% (not some at 0% and some at 15%).
This makes me a fan of selling enough stock and staying in a bracket so that your cap gains rate is zero.

WRONG! See post above, and do some reading on how taxes are calculated over long-term capital gains. They are NOT taxed at one rate. It is very possible to have some taxed at 0%, some at 15%, and some at 20% if you had a significant amount of LTCGs and minimal ordinary income.

RapmasterD

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Re: Need advice on selling apple
« Reply #43 on: September 02, 2014, 10:27:40 PM »
I wonder how many employees roaming the Cupertino campus have 75% of their net worth tied up in AAPL.

Sell Mortimer. Sell....

DK

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Re: Need advice on selling apple
« Reply #44 on: September 03, 2014, 06:22:37 PM »
How about......sell $360K of AAPL, take the $300K you have after taxes, invest it all in SDRL, collect 10% dividends, and retire now on $30K/yr.

:-)

dragon

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Re: Need advice on selling apple
« Reply #45 on: September 04, 2014, 10:08:33 AM »
I'll concede, I didn't understand how the Long Term Cap Gains works when crossing tax brackets.
I need to revise my excel file.

What I want to be able to give you is the tax you'll owe, depending on how much you sell.

I'm using 70,000 as wage income.
What's the cost basis of these AAPL shares?

mxt0133

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Re: Need advice on selling apple
« Reply #46 on: September 04, 2014, 12:08:59 PM »
@dragon

http://www.schwab.com/public/schwab/nn/articles/Taxes-Whats-New

Long-term capital gains and qualified dividends

A top rate of 15% applies to qualified dividends and the sale of most appreciated assets held over one year (28% for collectibles and 25% for depreciation recapture) for single filers with taxable income up to $406,750 ($457,600  for married filing jointly). Long-term capital gains or qualified dividend income over that threshold are now taxed at a rate of 20%.

EXAMPLE: If a married couple already has $457,600 of taxable income and an additional $100,000 in long-term capital gains and qualified dividends, the entire $100,000 would be subject to the 20% rate. If, however, they only had $400,000 of other taxable income, then $57,600 of the additional amount would be taxed at 15% and $42,400 would be taxed at 20%.

So capital gains are added to your taxable income.  Another example is if you are in the 15% tax bracket married filing joint with income under $73k you don't pay long term capital gains.  So if you have income of 50k and long term capital gains of 30K,  you would not pay capital gains tax on the first 23k of capital gains, 73k - 50k = 23k, and then you pay 15% capital gains tax on the remaining 7k of capital gains.

John122

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Re: Need advice on selling apple
« Reply #47 on: September 04, 2014, 07:47:29 PM »

 
I have 574 shares (of the 3500) at cost of 50.43, my last purchase of apple in 2011, I would like to sell these shares by year end.. My other shares were bought in 07 between 12 and 16 a share

My AGI should be 65k this year.... Married in the 15% tax rate.

I know by selling the 574 shares would put me in the 20% tax rate! just not sure how to calculate the taxes that I would owe....

I live in Michigan so I'm not sure if I would also owe state taxes on the sale..

Thanks for the help!!

mxt0133

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Re: Need advice on selling apple
« Reply #48 on: September 05, 2014, 12:59:55 AM »
@john122 I would use this calculator to estimate your taxes when you sell those shares, https://turbotax.intuit.com/tax-tools/calculators/taxcaster/.

If you AGI is 65k for the year(are you including the dividends from those AAPL shares?) then you have up to 8k of long term capital gains that are tax free.  Then after that you'll be paying 15% on any long term capital gains until you get to 406k.

milesdividendmd

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Re: Need advice on selling apple
« Reply #49 on: September 06, 2014, 02:12:26 AM »
Here is a nice article on apples current valuation.

http://www.millennialinvest.com/blog/2014/9/5/for-apple-the-iphone-6-doesnt-matter-valuation-does

Take home point:  take your time, and exit your position in a tax efficient way. Apple is in better shape to perform well as a stock than it was 4 years ago. (But you should  still exit your position IMHO.)