Deferring Capital Gains Tax

Deferring Capital Gains Tax

Say you are interested in buying a property, business or a building for yourself or your immediate family member using stocks in your portfolio.   The old way was to sell your stocks and then use the net proceeds a down payment on the home.   Then you could add your kids to the mortgage and after 12 months, quit deed the the property to them.  Simple enough, right?!  

Wrong.   What about Capital Gains Taxes that would be due on the sale of the appreciated Stocks?! If your company had given you options at 15 cents and now the company stock is trading at $150 dollar per share, we are talking an obscene amount of money you would owe to IRS.   It would be painful enough to warrant a search for an alternative. With Federal Tax Rate on long term Capital gains now at 20% and California at 8.9% it’s enough to cause one to pause.  

Well, there is indeed an alternative to accomplish the same while avoiding the Capital Gains mess. You can utilize a Pledge Asset Mortgage  which is offered my Morgan Stanley and may other investment banks that allow you to pledge the eligible (vested) stocks in your portfolio as collateral for a mortgage. The only catch is that the value of the securities held in the Pledge Account must be maintained at the 110% of the Pledge Amount.  

The neat part is that you are getting a First Mortgage without any down payment or  a 100% loan with competitive rates.   This option allows you to purchase the home, business or a building that you kids needs without compromising your investments or liquidating your assets.

The Pledge Assets feature allows you to sponsor an immediate family by using the stocks in your account for a mortgage in the name.   The securities will remain in your name, but the home and the mortgage can be in the family member’s name.  

You can speak to your Wealth Account Manager or a Morgan Stanley Private banker to get more details on this feature. 

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