Tax Loophole From 1960s Could Let Wealthy Tap 21% Corporate Rate

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Source: Bloomberg

An obscure tax provision from the 1960s that was left untouched by President Donald Trump’s overhaul could let wealthy individual investors seize for themselves the largest corporate tax cut in U.S. history.

The measure -- signed into law by President John F. Kennedy -- was designed to prevent Americans from indefinitely shielding themselves from taxes by keeping investments offshore. It forced them to pay taxes annually on these investments, but gave them the option to have that income taxed at the corporate rate instead of at individual rates.

For the past few decades, investors have had little reason to pick the corporate rate, since it was nearly the same as the top personal rate.

But that all changed in December, when Trump’s tax law slashed the corporate rate to 21 percent -- 16 percentage points lower than the top federal individual income tax rate.



Read more: https://www.bloomberg.com/news/articles/2018-07-11/tax-loophole-from-1960s-could-let-wealthy-tap-21-corporate-rate

[Midnight Writer]

1. Oh my! How could they have overlooked this? I am sure a fix is in the works.

[SWBTATTReg]

2. I doubt it...the long term capital gains tax of 15% beats all, if you even sell anything ever...nt

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3. That only works if you have LTCG

and the top LTCG rate (23.8%) is higher than the corporate rate now (21%). However, I agree this won't be a place to stuff common stock.

It could be very useful for things like rental property, bonds, and some other items.