Categorized | Investing

How Deferred Capital Gains Taxes Can Increase Your Returns

There is an interesting mathematical phenomenon that occurs due to the way investment capital gains are taxed in the United States.  In some situations, for investors who have profitable long-term holdings that have appreciated significantly over the years, it can actually be a bad idea to sell the asset when it becomes overvalued and swap into an undervalued security or property.  Seem counter intuitive?  It has to do with the economic effect caused by holding what amounts to an interest-free loan from the government.  To make sense of it, here are a couple of hypothetical scenarios that will illustrate the concept …

Source: About.com
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