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  • Top 3 REIT Opportunities From Tax Loss Selling [View article]
    TB: I tend to focus on taxes since I see the market as very efficient and taxes are one of the few areas where knowledge can make a difference to total return for us small investors (also fund expenses). To me the issue in this debate is whether REITs belong in a tax advantaged investment or a taxable investment and the difference can be large. I am in the 30% fed bracket with another 6% state. If I place the REIT in my taxable I will pay 36% tax on the dividend. If I place it in my IRA I am likely to pay the same 36% tax (depending on my rate when I withdraw the funds) but the tax will be deferred until I take the money out--deferral is very valuable to me and the only real reason to have an IRA.

    If I place a qualified dividend stock in my taxable I will pay 15% fed plus 6% state--so do I want to pay 36% or 21%? If I place a qualifed dividend stock in my IRA I lose the special rate and pay the same rate I would for a REIT.

    But the REIT is a better deal then the qualified dividend. Maximum corporate tax rate is 35% plus whatever your state charges--not sure what my state charges in corporate taxes but I will assume 6%. Total 41%--then when a dividend is issued they charge an additional 15% Federal and 6% state (we don't have a special rate for qualified dividends and I don't think many states do). Why we investors tolerate this double taxation has always been a mystery to me. Think about a stock holding where the company has a taxable income of $100,000 (for your portion of the income). The tax on that in my state might be $41,000. Then, whatever is provided in a dividend is taxed at the qualified dividend rate of 15% fed and 6% state --that works out to 62% tax on the dividend portion--what an outrage. The REIT is taxed at marginal tax rate of 30% and 6% (for me) or 36%.

    Now you think the average corporate tax rate is 15%. Not sure where you are getting that rate. Go to the library and look at the Value Line and they have an effective tax rate for each stock--most of them seem to be in the 35-40% range (fed and state).

    I hate the term "no brainer" but putting REITs in an IRA is a no brainer. Placing them in a taxable account is a suckers move unless you have no choice.
    Nov 24, 2015. 08:33 PM | Likes Like |Link to Comment
  • Top 3 REIT Opportunities From Tax Loss Selling [View article]
    Dane: You are right--except I might quibble with the "fully defers" statement. Most REITs distribute more than the 90% required by tax law and anything over 100% of income is return of capital. But the first 100% is always taxable. But not sure that is a reason to place the REIT in a taxable account. Place it in an IRA and the return of capital is a wash--no advantage or disadvantage. In a taxable account you get your own money back and don't have to pay tax on it (but do have to pay full tax on that 100% of REIT income portion). But the return of capital decreases your basis so you will pay down the road--and what really is the value of return of capital? If I wanted my money back I wouldn't invest in the first place. So my bottom line is a REIT with a large return of capital might be less bad in a taxable account than one like Simon that keeps its dividend around their level of income-but it still belongs in an IRA if you have room. I think the one time it doesn't make any difference is when you have a REIT that has no taxable income--usually a recent IPO with a huge amount of depreciation, that has no taxable income and all of the return is ROC.
    Nov 24, 2015. 05:41 PM | Likes Like |Link to Comment
  • Top 3 REIT Opportunities From Tax Loss Selling [View article]
    Dane: Think you are almost totally wrong. REIT dividends are not taxed like "any other equity". Qualified dividends (from C-Corps) are either tax free in a taxable account (10/15% marginal tax rates) or are taxed at 15% for those in the 25-30% marginal tax rates. REIT dividends are taxed equal to your marginal tax rate when placed in a taxable account--that is if you are in the 15% category you still have to pay 15% fed tax plus state tax. If you are in the 30% bracket you pay 30% tax, etc. You are right that REITs don't pay corporate tax and that is the reason that C-corps get the qualified tax rate--to lessen the amount of double taxation. If you have a tax advisor ask them where you should place your REITs and for almost everyone the answer will be 401K/IRA. This has been the law since qualified dividends came on the scene in 2003 so sounds like you have missed the boat for the last 12 years--which tells me you don't have a tax advisor! The point of all this tax talk is that there should be very little tax loss selling related to REITs.
    Nov 24, 2015. 03:52 PM | 4 Likes Like |Link to Comment
  • Top 3 REIT Opportunities From Tax Loss Selling [View article]
    TB: Thanks for the response. I understand the issue of tax advantaged space being limited for some--on the other hand there is nothing that gets better treatment in an IRA (saves more in taxes) so along with most bonds it seems like an automatic for an IRA. Your point about REIT dividends being irrelevant to someone in a 15% or lower tax bracket--not sure of your point. Qualified dividends are federal tax free for those folks--REITs are not--you would still pay taxes on them in a taxable account--so qualified dividends from C-corps are great in a taxable account for those folks but not REITs unless they have no room in their 401K/IRA.
    Nov 24, 2015. 03:40 PM | Likes Like |Link to Comment
  • Top 3 REIT Opportunities From Tax Loss Selling [View article]
    Seems strange that many investors would hold fully taxed REITs in taxable accounts. Seems an automatic choice for IRAs. Anybody out there care to explain their decision to hold REITs in a taxable account?
    Nov 24, 2015. 08:52 AM | 1 Like Like |Link to Comment
  • Why Roundy's Is Very Significant To Kroger's Stock Price [View article]
    You don't make the transition from revenue of Roundy's to profit to Kroger. If the added stores aren't profitable then how does the added revenue help Kroger?. Harris Teeter was a profitable company before Kroger bought it. Kroger came in and made some changes in pricing strategy but otherwise it seems like the same chain (you would never know Harris Teeter is owned by Kroger if you shop in the store or look at their products or ads). As wpx indicates it is no slam dunk. It seems that Kroger doesn't change the name of stores it acquires (Harris Teeter, King Sooper, City Markets, etc) so not sure how that gets them into Chicago--other than trying to improve the operation of the Mariano and other Roundy chains.
    Nov 23, 2015. 11:43 AM | 1 Like Like |Link to Comment
  • FedEx: 25-50% Upside Potential In 12 Months [View article]
    Have seen mention that there might be a Uber type of competition coming to the delivery world. Individuals delivering packages in their commuting area--maybe while waiting for taxi business in the busy periods. It would seem that package delivery would be less regulated than the passenger taxi business--so what will keep them out? If it works for pizza and other restaurants why won't it work for many other businesses with packages to deliver. I would be hesitant to bet on the future of FDX/UPS ground growth.
    Nov 22, 2015. 11:39 AM | 1 Like Like |Link to Comment
  • Time To Cover Any STAG Shorts, But Wait Until Mid-December To Consider Buying REITs [View article]
    Well explained Cory. Wonder if we will be hearing from that silly rabbit on the topic.
    Nov 18, 2015. 11:27 AM | 1 Like Like |Link to Comment
  • Maximising Shareholder Value Has Nothing To Do With Maximising The Share Price [View article]
    A strange combination of opinions. You finish with a quote from Warren Buffett talking about long term goals but the premise of your argument seems to be your opinion that "a dividend today is preferable to a dividend in 50 years' time". As you know, Berkshire, in 2015, is celebrating 50 years under Buffett control and during that 50 years there was one small dividend ( I think 1972). Obviously to the Berkshire investors a dividend was not preferable up front and it was not the basis of the tremendous performance of their investment. First, because it is far more tax efficient for the corporation to retain those earnings and secondly it allowed management to wisely reinvest those earnings and compound them--tax deferred. So where does the value of Berkshire reside--the appreciation of the stock over those 50 years and into the future. That stock appreciation is the primary goal of many investors--but appreciation can and should be a long term goal. Dividends are the short term goal--often increased to keep the short termers happy (think of big oil now--increasing dividends as earnings disappear, or all those dividend aristocrats at the bottom of the last recession increasing the dividend when (if they cared at all about the long term) should have eliminated the dividend and used the cash to buy back shares on the cheap).
    Nov 18, 2015. 08:30 AM | Likes Like |Link to Comment
  • Jeremy Siegel's Case For Equities [View article]
    You say "rather, the cap weighted index fund continues to buy more as the market cap rises". I see this erroneous statement on a regular basis here on SA. As the price of a stock goes up the index fund doesn't have to buy more. It happens automatically as the share price goes up. An index fund never has to buy and sell to stay market weighted--the market does that automatically. I think what you are trying to say is that those overpriced stocks make up a bigger share of the fund as the price rises.
    Nov 12, 2015. 07:44 AM | 2 Likes Like |Link to Comment
  • Closed-End Target Date Muni Bond Funds Have A Good Yield And Low Interest Rate Risk [View article]
    Another way of looking at it LB. Current price of 15.48 with NAV of 15.43. That NAV won't disappear (unless they did a real poor job of picking bonds). Assuming a payout of $15 then the excess NAV of .43 will be paid out, in addition to whatever the fund earns between now and maturity (less expenses of course). That excess distribution cancels out the capital loss. Since all munis are held in taxable accounts we get a tax loss of .48, a NAV distribution of .43 and whatever the fund earns in interest. To me the historical distribution is meaningless since they are in the process of liquidation. Seems like every investment choice comes down to what we compare it to. You compare it to EIV. I would compare it to a 3 year Treasury or any other short term investment without much risk. If interest rates spike the EIV will lose principal and I am thinking BPK won't. On the other hand the BPK seems to hold some bonds that extend beyond the maturity date so not sure how that works.
    Nov 11, 2015. 07:52 PM | Likes Like |Link to Comment
  • Dead Sector Walking: Traditional Retail Is Still An Investing Graveyard [View article]
    How about the REITs that rent space to these stores? What is your take on outlet malls, strip malls, etc? Can I assume you don't automatically include grocery stores and some other retail types in the "stay away" category?
    Nov 11, 2015. 06:49 AM | 1 Like Like |Link to Comment
  • Stocks Finally Drop, Venezuela On The Brink Of Collapse - Bezek's Daily Briefing [View article]
    You might have learned the wrong lesson CT. In the 1990s there were a slew of Janus funds, including Janus 20, that held most of the same stocks--overpriced tech stocks. Momentum stocks that looked good on the way up (Cisco at 82 anyone?). They all dropped not because they were run by Janus but because they had the same overpriced stocks. If you had owned the Fidelity high tech funds at that time they would have dropped also. Maybe the lesson you should take is to understand what is in your mutual funds. Spreading them to different fund companies won't solve your problem.If you don't want to bother with that buy a S&P 500 index fund like Buffett suggests.
    Nov 10, 2015. 09:20 AM | 4 Likes Like |Link to Comment
  • Gilead - Good Newsflow Accelerates; All-Time Highs Now Achievable [View article]
    Doctor: I understand "budget" (low expense) but not sure what "generic" means. Here is a quote from a 2014 Market Watch article "Quietly, Vanguard's actively run funds have outperformed their more famous index siblings said Morningstar researcher John Rekenthaler, pointing to returns over the past 15 years".

    Think about that for a second--a huge percentage of actively managed funds under perform their index over any 10 year period, but Vanguard's actively managed funds (as a group) outperform. In another article the out performance was identified as .79% a year. Why isn't Vanguard pounding the table with the info--I think they don't want to embarrass John Bogle and his crusade on indexing.

    The Vanguard Health fund has been a five star/four star (based on past performance) fund for 30 years--although I would grant that it is slipping. It recently lost its long term manager and it has probably gotten too large with $51 billion in assets--but generic--I don't think so.
    Nov 8, 2015. 08:49 AM | Likes Like |Link to Comment
  • Gilead - Good Newsflow Accelerates; All-Time Highs Now Achievable [View article]
    Here's my theory. Vanguard Health Fund (VGHAX/VGHCX) has $51 billion in assets and holds 82 stocks, many of them biotech. And not a single share of GILD. They did own some in 2013/14. They see something they don't like right now about the stock. When they start buying the shares will move up.
    Nov 6, 2015. 02:08 PM | Likes Like |Link to Comment