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How to Help Individual Clients with Tax Planning in 2019

Updated: Oct 2, 2021

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The first of this three-part series generalized the methods I use for tax planning. We discussed the various methodologies employed, as well as generic tax planning ideas for various clients. In Part II, we will mainly focus on tax planning for individuals, and I will review various strategies that have been traditionally applied in tax planning, as well as strategies made possible by the TCJA.

Harvesting Gains and Losses

First and foremost, you should have a very good relationship with a financial advisor you both trust and can refer to clients. If your client has their own, have a conversation with this professional to discuss your client’s various accounts. Note: Before you can discuss the particulars of a client’s tax situation with another person, the client must consent to the discussion. You should get this in writing and have the client state what you can and cannot discuss.

What's the reason for this? Well, "taxable" accounts, or financial accounts that are not encompassed by a qualified plan, need a lot of babysitting. A lot of things can be derived from them, including short- or long-term capital gains and losses.

Harvesting gains and losses means you are looking for ways to circumvent any short- or long-term capital gains by any losses that may have been incurred in the current year or prior ones. For example, if a client has a capital loss carry forward of $45,000, they sell securities with a capital gain of $45,000. The net result would be no capital gain taxes owed.

On the other hand, in the current year, your client could have a capital gain of $65,000 and unrealized losses in their portfolio of $45,000. If the financial advisor feels the unrealized losses will not have a turnaround, discuss selling the securities with a loss.


Cryptocurrencies like Bitcoin and others are the new buzzword in taxation. Outside of the draw to crypto and the hype that follows it, what is important to know is the IRS treats crypto as property. What that means is: Crypto is tied to the US dollar. For example, today, one Bitcoin equals $9,469.52. The taxation of crypto is much the same as securities.

Constantly converting one cryptocurrency to another is much like being a day trader who buys and sells stocks on a continual basis. When one cryptocurrency is exchanged for another, the taxation is calculated by the dollar values of the crypto exchanged versus the crypto received. Any crypto converted to the US dollar is either a short- or long-term gain or loss.

When Tax Planning for Gifts Affects Income Tax Planning

For gift tax purposes, in 2019, you can give one person $15,000 per year. If you are married and elect gift-splitting, you can give $30,000 to one person.

If you exceed the gift tax limits in a year, you have to file a gift tax return. Usually, there is no gift tax due, unless the exclusion has been exceeded. In 2019, the gift tax exclusion is the estate tax exemption of $11.4 million in your lifetime. There are easier ways to give to a person, exceed the gift tax limits and not pay taxes.

I had a client who wanted to give their grandchild $20,000 to pay for college. The grandfather was an ex-Disney employee and had Disney stock. His basis in the stock and the amount he wanted to give was $11,000. The FMV was $20,000. When the grandchild sold the stock, he had a long-term capital gain of $9,000. The grandfather did not owe gift tax, and the grandchild didn’t owe any capital gains tax.

Why? Well, the basis of the stock was $11,000 and therefore, under the limitations for gift tax for the grandfather. The grandson had no other income for the year. He had a $9,000 long-term capital gain. Since the grandson did not have income in excess of the 15 percent tax bracket, he did not owe any capital gains tax.

As you can see, tax planning is tightrope that needs to be walked carefully.

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