Deferring Capital Gains Tax

Deferring Capital Gains Tax

Home prices in July dipped by 0.3% due to the rise in interest rates and decline in investor demand.    Does that mean this is a good time to purchase a home for the kids using your stock holdings!?  May be, but what would you do with the Capital Gains tax!?  With a combined State and Federal rates nearing 29% that’s a huge hit to your net proceeds that will impact your buying power.   

There is a way to make this purchase without liquidating your stock portfolio hence avoiding the capital gains tax all together.  Using a Pledge Asset Mortgage  which is offered my Morgan Stanley and may other investment banks, you can borrow money for this purchase when you pledge the eligible (vested) stocks in your portfolio as collateral for this 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 investment banks will require similar underwriting guidelines, but since you have pledged some assets to secure this mortgage, the underwriting guidelines are not simpler than the typical 30 year mortgage now offered by National lenders.

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 buy 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 stay 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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